the pound fell back below 130 uk government bond yields dropped sharply and london’s equity futures jumped after data showed britain’s inflation has dropped to its lowest in more than a year headline annual inflation rose 79 last month less than economists forecasts of 81 and way below may’s 87 according to the office for national statistics the core reading which strips out volatile prices like food and energy dropped from 71 to 69 which was 02 percentage points below forecasts the data is good news for the bank of england which despite raising interest rates from near zero at the start of 2022 to 5 currently has struggled to get consumer price inflation down to its 2 target after it spiked into double digits last year the report which was the first lowerthanexpected reading in five months took the market by surprise forcing sterling gbpusd down 08 to 12933 and pushing 10year gilt yields tmbmkgb10y down 04 to 4340 the ftse 100 ukx rose sharply as investors welcomed the lower pound and bet that uk borrowing costs may not have to rise as much as feared jeremy hunt uk chancellor welcomed the news but stressed authorities neede to remain vigilant “today’s news shows if the government and the bank of england are prepared to take difficult decisions we can win the battle against inflation but prices are still rising too fast so we need to stick to the plan until the job is done” this view was shared by analysts “even with a softerthanexpected figure inflation in britain remains high and stickier than in other western economies and that keeps odds for further boe action sensibly more hawkish than for other major central banks the boe raised its policy rate to 5 at its latest meeting and is expected to continue toward 65 to 7 range in the next few months” said ipek ozkardeskaya senior analyst at swissquote bank saxo uk ceo charles whitethomson said “we should prepare for a 25bp hike by the bank of england on august 03 the war to defeat inflation is not over and the governor has nailed his colours to the 2 target motor fuel prices led the largest downward contribution to the monthly change in cpi while yearly food remains stubbornly high at 174 according to the office for national statistics”