By David Milliken and Suban Abdulla
LONDON (Reuters) -British consumer price inflation fell to 3.6% in October from September's joint 18-month high of 3.8%, official figures showed on Wednesday, the first drop since May and one which offers some relief to the government and the Bank of England.
Both the BoE and economists polled by Reuters had expected the fall, after inflation in September did not reach the 4% mark which the central bank had previously forecast.
Sterling fell by just over a tenth of
a cent against the U.S. dollar after the data.
Even so, the BoE paused its quarterly pace of rate cuts earlier this month and finance minister Rachel Reeves has said she will seek to avoid tax and spending measures that might add to inflation in her annual budget on November 26.
Some economists estimate that a higher minimum wage, increased taxes on employers and other levies she announced last year have added as much as 1 percentage point to Britain's inflation rate, which remains the highest among major advanced economies.
Earlier this month the BoE forecast inflation would remain above its 2% target until mid-2027, largely due to wage growth that is faster than many BoE policymakers think is consistent with on-target inflation, given sluggish productivity growth.
Higher labour costs have been particularly felt across much of Britain's services sector.
Services price inflation - which is watched closely by the BoE, fell to 4.5% in October from 4.7% in September, a slightly bigger drop than economists' median expectation of a fall to 4.6%.
Lower household electricity and heating bills and cheaper hotel room prices pushed down on inflation in October, the Office for National Statistics said.
Core CPI, which excludes volatile food, energy, alcohol and tobacco prices, slowed as expected to 3.4% in October from 3.5%.
Food and drink inflation, which the BoE expects to reach a peak of 5.3% in December, was 4.9%.
(Reporting by David Milliken; Editing by Muvija M and Sarah Young)
