UK headline inflation held steady for a second straight month and the core measure eased, complicating the picture for the Bank of England that is widely expected to hike interest rates in August.
Consumer prices climbed 2.4 percent year-over-year in June, the same rate of increase as in the previous two months. Economists had expected inflation to accelerate to 2.6 percent.
On a monthly basis, consumer prices remained flat in June versus the expected increase of 0.2 percent.
“Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen,” ONS Head of Inflation Mike Hardie said.
“However, gas and electricity, and petrol prices all rose, with consumers seeing the highest price at the pump for nearly four years, with inflation remaining steady overall.”
Core inflation that excludes energy, food, alcoholic beverages and tobacco, eased to 1.9 percent in June from 2.1 percent in May. The rate was expected to remain unchanged.
Economists said the latest easing in core inflation is unlikely to deter the Bank of England from hiking interest rates in August.
“If core inflation were to continue falling faster than the Bank expects, then we think this would make a second rate hike in 2018 even more unlikely,” ING Bank economist James Smith said.
“Once the Bank has hiked rates in August, we think heightened Brexit uncertainty could make it very complicated for policymakers to raise rates again before May 2019.”
Another report from the ONS showed that input price inflation quickened to 10.2 percent in June from 9.6 percent a month ago. Prices were expected to grow by 10.1 percent.
This was the highest input price inflation since May 2017, driven by higher crude oil costs, despite falling on the month.
Meanwhile, monthly input price inflation eased notably to 0.2 percent from 3.3 percent in May. The expected increase was 0.4 percent.
Output price inflation edged up to 3.1 percent in June from 3.0 percent in the prior month. Month-on-month, output prices gained 0.1 percent from May, when it rose by 0.5 percent.
“If oil prices continue to fall back over the rest of the year, as we expect, then input price inflation is unlikely to remain this high for long,” Capital Economics economist Ruth Gregory said.
“And with few signs of “second-round” effects on wage settlements or inflation expectations, CPI inflation still seems likely to reach the 2 percent target by this time next year.”
Separate data from the ONS showed that average house prices in the UK in May grew at the slowest annual rate since August 2013.