UK interest rates forecast to rise less sharply after inflation falls to 7.9%

Annual rate back on downward path, which eases pressure on Bank of England

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UK inflation fell further than expected in June to 7.9% amid a sharp drop in petrol prices, easing forecasts for how aggressively the Bank of England will raise interest rates over the coming year.

In the first positive surprise for inflation since January, the Office for National Statistics said the annual inflation rate as measured by the consumer prices index resumed a downward path after unexpectedly sticking at 8.7% in May. The drop exceeded City forecasts for a decline to 8.2%.