Britain's inflation rate unexpectedly fell in June as the cost of foreign holidays declined in contrast to rises a year ago during the Jubilee holidays.
The Office for National Statistics said retail prices excluding the cost of home loans fell 0.1 per cent on the month in June, taking the annual rate down to 2.8 per cent from 2.9 per cent in May. Analysts had predicted a rise to 3 per cent.
This was still above the Bank of England's 2.5 per cent target but will lend further support to the view that inflation has now peaked. It will also provide more justification to the central bank's decision to cut interest rates to a new 48-year low of 3.5 per cent last week.
There was also a large downward contribution from housing as house prices in June rose less than a year ago.
Motoring costs, however, exerted an upward effect on RPI as the cost of insurance and tax rose while prices for vehicles fell by less than last year.