LONDON: British consumer price inflation fell by more than expected to 10.1% in January from December’s 10.5% and there were also drops in underlying measures of inflation that are being closely watched by the Bank of England, official data showed.

Economists polled by Reuters had forecast that the annual CPI rate would drop to 10.3% in January, moving further away from October’s 41-year high of 11.1% but still eroding the living standards of households.

Core CPI - which excludes energy, food, alcohol and tobacco - fell to 5.8% in January from December’s 6.3%, the Office for National Statistics said on Wednesday.

Sterling fell against the US dollar and the euro after the data was published.

Earlier this month the Bank of England said it saw signs that the surge in consumer prices had turned a corner and it suggested it was close to ending its run of interest rate hikes.

Investors expect another increase in borrowing costs next month by the BoE but Wednesday’s data may add to the sense that a peak in Bank Rate is not far off.

Prices of services, which are also in the BoE’s spotlight, slowed their rise in January, rising by an annual 6.0% compared with 6.8% in December.

“While any fall in inflation is welcome, the fight is far from over,” finance minister Jeremy Hunt said.

“High inflation strangles growth and causes pain for families and businesses - that’s why we must stick to the plan halve inflation this year, reduce debt and grow the economy.