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Drop in UK inflation rate to 1.6 per cent eases pressure on Bank of England to raise rates soon

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LONDON - Britain's inflation rate fell more than expected in July, to 1.6 per cent from 1.9 per cent in June, easing pressure on the Bank of England as it weighs when to raise interest rates.

The Office of National Statistics said Tuesday that a fall in clothing prices provided the biggest contribution to the drop in consumer price inflation. A drop in the cost of alcohol, financial services and food also contributed.

The Bank of England, which targets a 2 per cent inflation rate, is assessing when to start increasing rates as the economy improves.

Samuel Tombs, senior U.K. economist at Capital Economics, says "a general environment of benign inflationary pressure will give the (Bank of England) scope to raise them at an even more gradual pace than currently anticipated by the markets."

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