Pound falls after cooler-than-expected British inflation
Adds analyst comment in paragraph 5, updates prices at 0626 GMT
LONDON, Oct 16 (Reuters) -The pound dropped on Wednesday after data showing British inflation slowed more than expected in September, making it easier for the Bank of England to cut interest rates further this year.
The pound dropped 0.5% on the dollar to $1.30075, having been flat before the data. Sterling also weakened versus the euro, which rose 0.4% to 83.63 pence. GBP=D3, EURGBP=D3
British inflation was 1.7% year-on-year in September from 2.2% in August, the lowest reading since April 2021 and below a Reuters poll which expected 1.9%.
Headline CPI was flat month-on-month, and closely-watched services inflation slowed to 4.9% year-on-year.
“The dip in inflation confirmed today suggests a November cut to interest rates is likely, with the question now whether borrowers can look forward to another one after that before the year is out," said Ed Monk, associate director, Fidelity International.
The BoE cut borrowing costs from a 16-year high of 5.25% to 5.0% in August but has signalled it will move carefully on further reductions as wage growth - a big driver of inflation in the services sector - is slowing only gradually.
Expectations that the BoE would cut rates more slowly than the Federal Reserve and the European Central Bank supported the pound earlier this year, though the gap has narrowed somewhat.
The European Central Bank meets on Thursday, and is expected to cut rates by 25 bps, with investors' focus on whether President Christine Lagarde will give any hints about policymakers longer term expectations, important for the euro's future path, including against the pound.
Reporting by Alun John and Medha Singh, editing by Amanda Cooper and Jane Merriman
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