LONDON: Sterling fell on Tuesday after data showed UK inflation tumbling to its lowest in more than 14 years in December, leaving the Bank of England under little pressure to begin raising interest rates any time soon.
Reflecting a slide in global oil prices, consumer price inflation halved to an annual 0.5 percent in December from 1.0 percent in November. Economists taking part in a Reuters poll had expected inflation to fall to 0.7 percent.
That bolstered expectations the BoE will wait until well into 2016 before it raises interest rates, a view that has changed dramatically in the past six months - last summer, many had expected a rate hike by the end of 2014.
Sterling slid to a day's low of $1.5077 after the data, weakening from around $1.5115 before its release. It was last trading at $1.5096, down 0.5 percent on the day and close to an 18-month low of $1.5034 reached last week.
"What we have, clearly, is an awful lot of disinflationary pressures ... and it means the Bank of England will be in no rush to raise interest rates," Rabobank senior FX strategist Jane Foley said. "Is the UK close to a deflationary spiral? I think it's probably too early to be extremely worried."
The Office for National Statistics said falling petrol prices and lower electricity and gas bills compared with a year ago were the biggest factors pushing down inflation.
BoE Governor Mark Carney last month described falling oil prices as "unambiguously net positive" for Britain's economy.
Britain's top share index gradually extended gains following the inflation data, with the FTSE 100 up 0.6 percent, in line with the pan-European FTSEurofirst 300.
Against the euro, the pound inched down 0.2 percent to 78.10 pence.
"Uncertainty about the May General Election and the sharp correction in UK interest rates are probably the two factors that have prevented euro/sterling breaking lower alongside euro/dollar," ING analysts wrote in a note.
Earlier data showed British retail spending grew last month at its weakest for a December since 2008, after consumers splashed out on November's "Black Friday" bargains and as prices continued to fall broadly.
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