UK inflation tumbles

Inflation tumbled to 1.9 per cent this morning - below the Government's 2 per cent target for the first time since March last year. The fall came as a surprise to the City, and gilt and short sterling futures leapt as further interest rate rises from the Bank of England became unlikely. Markets had been expecting Bank rate to rise to 6 per cent in the next few months, but experts now think rates have probably peaked at 5.75 per cent. As a result of the dip, the pound briefly broke back down through the $2 level.