Britain's consumer prices index (CPI) fell to 1.6 percent in the year to July 2014, exceeding the market's expectations, data from the Office for National Statistics (ONS) showed Tuesday.
The inflation rate fell from 1.9 percent in July, which was well below the Bank of England's 2 percent target. This eases market expectations of a rise in interest rates.
A fall in clothing prices provided the largest contribution to the fall in the rate. Prices of alcohol, financial services and food product groups also dragged down the rate, ONS said.
The largest, partially offsetting, upward effect came from the transport industry.
CPIH, an inflation gauge include consumer prices and owner occupier's housing costs, increased 1.5 percent in the year to July 2014, down from 1.8 percent a month previous, data showed.