UK inflation hits three-year low, fueling rate-cut hopes

Britain's annual inflation rate fell to a three-year low in September, official data showed on Wednesday, fueling speculation that the Bank of England will resume cutting interest rates next month.

The Consumer Prices Index (CPI) reached 1.7 percent last month, well below the BoE's two-percent target, after hitting 2.2 percent in August, the Office for National Statistics (ONS) said in a statement.

The inflation rate was lower than the 1.9 percent rise that analysts forecast and has cemented expectations that the central bank would likely cut interest rates again in November.

"Lower airfares and petrol prices were the biggest driver of this month's fall," said Grant Fitzner, chief economist at the ONS.

He added that this was partially offset by a strengthening in food price inflation for the first time since early last year.

The inflation data "clears the path for another 25-basis point rate cut in November," said Richard Flax, chief investment officer at wealth management company Moneyfarm.

"The underlying conditions support this move, energy prices have eased, the economy has cooled, and the labor market has stabilized," he said.

It comes after official data on Oct. 15 showed an easing in Britain's unemployment rate and wage growth, which also bolstered analysts' expectations of a rate cut.

"It is absolutely amazing to see such a dramatic drop in the U.K.'s CPI number, and the news had brought nothing [but] good things for the Bank of England," said Naeem Aslam, chief investment officer at Zaye Capital Markets.