The Office for National Statistics (ONS) revealed that the consumer prices index (CPI) measure of inflation remained static at 2.4% in June.
The figure was a surprise as economists were predicting a lift to 2.6% because of higher oil costs – a scenario that would have bolstered expectations of a rise in interest rates by the Bank of England next month.
Sterling – already weakened amid political turmoil over the government’s Brexit blueprint – fell by 0.7% against the dollar to just above $1.30 as investors registered their disappointment with the core inflation number.
The ONS said discounting by retailers helped offset rising energy costs.
Mike Hardie, its head of inflation, explained: “Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen.
“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.”
The ONS noted the largest decline in clothing costs – particularly for men – for June since 2012 of 2.3% as summer sales got underway.
It also noted a 0.6% year-on-year reduction in food costs.
Ahead of this week, financial markets saw an 80% chance of the Bank of England raising rates in August because of strong evidence the first quarter slowdown for the economy was a bad weather-inspired blip.