The UK’s inflation rate fell to its lowest for more than three years in December, increasing speculation that interest rates could be cut.

The rate dropped to 1.3% last month, down from 1.5% in November, partly due to a fall in the price of women’s clothes and hotel room costs.

December’s inflation rate was the lowest since November 2016.

Analysts said it raised the chances of a rate cut, with inflation below the Bank of England’s target of 2%.

“Very soft UK inflation data for December leaves the door wide open for a Bank of England rate cut on 30 January,” said Melissa Davies, an economist at stock broker Redburn.

The Bank’s main interest rate is used by banks and other lenders who set borrowing costs.

It affects everything from mortgages

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