Price pressures remained largely absent on the British high street last month, according to official figures published yesterday, which some economists said reinforced the case for interest rates to remain on hold for another month or two.

Although the inflation rate slipped back by more than expected in July, economists are looking to today's quarterly inflation report from the Bank of England, with its detailed growth and inflation forecasts, for a better indication of the likely path of interest rates.

"Another hike in November is highly likely and we could get one more this year, but it remains to be seen when," said Mr Michael Saunders of Citibank.

Explaining its decision to raise interest rates to 4.75 per cent last week, the bank's monetary policy committee (MPC) said consumer prices index (CPI) inflation was "likely to fall back in the near term, but underlying cost pressures have risen".

The Office for National Statistics (ONS) yesterday said inflation on the CPI dropped from 1.6 per cent in June to 1.4 per cent last month, the slowest pace since April and away from the bank's 2 per cent target.

Cheaper furniture was the key drag on inflation as seasonal price reductions and summer sales were much larger than a year ago, the ONS said. But more expensive cable television subscriptions and package holidays to Europe stopped the rate edging down further.

Mr Neville Hill of Credit Suisse First Boston said the figures were unlikely to have a significant impact on the MPC's decisions, especially as they saw pipeline inflationary pressures intensifying. "We think the lack of any upwards trend in CPI inflation clearly means there is little need to tighten faster than a "gradual pace," Mr Hill said.

Yesterday's inflation report was more important, said BNP Paribas' Mr Richard Iley. "We expect this to chime a dovish note, with the MPC's inflation projection based on market expectations levelling off at 2 per cent at the two-year horizon," he said.

Such a forecast would imply that fewer interest rates would be needed to keep inflation on track.

Today the MPC will for the first time place the primary emphasis on its inflation projection based on market expectations, rather than on interest rates remaining the same. Economists said this would allow the committee to shift market expectations more easily.