UK interest rate rise in doubt as inflation stays at 2.4%

Rising petrol prices failed to fuel a rise in inflation. Photograph: Lewis Whyld/PA

The chances of a rise in interest rates in August have dipped after British inflation remained at a one-year low last month.

Confounding expectations for the return of higher rates of inflation in June fuelled by the rising price of petrol, the Office for National Statistics said the consumer price index remained unchanged at 2.4% from the previous month.

Although the cost of gas and electricity increased and the price at the pump hit the highest level for nearly four years, consumers benefited from the falling cost of computer games and the summer clothing sales. House prices across the UK also rose at the slowest pace in nearly five years.

Faced with falling wage growth, the latest snapshot from the ONS poses the Bank of England with limited grounds for raising interest rates next month. Sterling slid to a 10-month low against the dollar on foreign exchanges after the data was released.

Threadneedle Street may still be able to point towards recovering economic growth across the UK in recent months, although subdued levels of inflation and weak wage growth remove some of the impetus for raising the cost of borrowing. The Bank has a target of 2% for inflation set by the government.

While inflation remains above target, economists said the cost of living measure was gradually falling from its peak of 3.1% in November as the effects of the Brexit vote – which pushed up the cost of imports to Britain – begin to fade. There could, however, be rising inflation ahead as manufacturers raise their prices.

The falling price of men’s clothing helped to offset the rise in petrol prices, coming at a time of rising oil prices on the international market. The ONS said the monthly drop in clothing costs in June was the biggest recorded since 2012 as shops staged their summer sales amid deep gloom on the high street.

The TUC general secretary, Frances O’Grady, said: “With wage growth stalling, now is not the time to hike interest rates. Household budgets are still under huge pressure.”