British inflation held at two per cent in June, defying forecasts for a slight fall, and underlying price pressures persisted, maintaining uncertainty about the date of the Bank of England's first interest rate cut since 2020.
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Economists polled by Reuters had mostly expected headline consumer price inflation would ease to 1.9 per cent in the 12 months to June, extending its drop from a peak of 11.1 per cent in October 2022.
Inflation for services was much stronger at 5.7 per cent, the Office for National Statistics said, unchanged from May.
The Reuters poll had pointed to a slightly weaker 5.6 per cent increase.
The BoE, which has a target of consumer price inflation of two per cent, has expressed concern about the strength of services inflation, which largely reflects pressure from wage growth in a labour market short of candidates to fill jobs.
Data due on Thursday is expected to show wages growing slightly less strongly than in data published a month ago but still rising by almost six per cent - roughly double the rate that would be compatible with keeping inflation at two per cent.
The BoE is due to announce its next decision on interest rates on August 1 and investors see a roughly 50 per cent chance of a first cut to borrowing costs since 2020.
A rate cut would give an early boost to new Prime Minister Keir Starmer and his finance minister Rachel Reeves, who have said they will speed up the slow-moving British economy after winning power in a landslide election two weeks ago.
But last week the BoE's chief economist, Huw Pill, said he was focused on persistently strong price pressures and said the timing of the first rate cut was an open question.
Core inflation - excluding volatile food and energy prices - held at 3.5 per cent in the year to June.
The BoE had expected headline inflation of two per cent in June and services inflation of 5.1 per cent.
The BoE also expected headline inflation to rise back above its target later in 2024 and through 2025.
Australian Associated Press
