Inflation fall gives Bank of England knife-edge interest rate decision

The Bank of England said last month it had expected inflation to rise slightly in August before falling sharply to about 5% in October. Photograph: Martin Godwin/The Guardian

The Bank of England faces a knife-edge decision on interest rates after an unexpected fall in UK inflation last month, as financial markets bet the central bank could leave borrowing costs unchanged for the first time in almost two years.

In a crunch week for the economy, the August figures from the Office for National Statistics on Wednesday led financial markets to give a more than 50% chance of the central bank keeping interest rates on hold on Thursday.