Inflation rose by 2% in the 12 months to June, holding steady at the Bank of England’s (BoE) target for the second consecutive month.

The Office for National Statistics (ONS) has reported that the consumer price index (CPI) also grew by 0.1% month-on-month, which is the same rate as in June 2023.

The ONS said that the largest upward contribution to the monthly CPI rate change came from restaurants and hotels, where prices of the latter increased by more than a year ago, with clothing and footwear being the largest downward contributor, with prices of garment falling this year, after a rise in 2023.

Personal finance analyst at Bestinvest, Alice Haine, said: "UK inflation held at 2% in the 12 months to June, remaining at the BoE’s target for the second month in a row time and raising hopes that the central bank may finally push ahead with its first interest rate cut since the start of the pandemic at its Monetary Policy Meeting early next month.

"The BoE’s lengthy battle to tame rampant inflation, which hit a peak of 11.1% in October 2022, has seen the headline interest rate held at a 16-year high of 5.25% for almost a year. While households contending with high borrowing costs will be hoping for some respite sooner rather than later, lingering inflationary pressures were evident in the strong services inflation, which remained stubbornly high at 5.7%, the same rate recorded in May.

"Some may blame the Taylor Swift effect for robust services inflation in June, with rising hotel prices delivering an inflationary hit. However, core inflation, which strips out the more volatile items such as food, alcohol and tobacco, was also a cause for concern holding at 3.5% for the second month in a row."

Across core CPI, the goods annual rate fell from -1.3% to -1.4%, while the services annual remained at 5.7%.

Despite inflation consecutively remaining at 2%, analysts have noted that 48% of investors believe that inflation will rise again over the next six months.

Chief investment analyst at Charles Stanley Direct, Rob Morgan, added: “It’s not time to pop the champagne corks just yet. There are two sides to the inflation story. While goods inflation, including food, has come under control, core CPI looks set to remain higher, indicating lingering pressures. While the worst of the post-COVID inflation burst is behind us, a strong jobs market, buoyant wage growth, mildly improved British growth, and lingering supply chain issues may push prices up in the months to come. All eyes will be on Thursday’s data on wages, the key input into service inflation, before a decision can be made about a rate cut next month.

"Almost half of British DIY investors are not confident that inflation will remain on track, but the vast majority expect rate cuts to follow regardless. Many will be balancing both their portfolios and their household budgets accordingly, increasing their exposure to equities to ensure their investment outpace cash returns, ensuring they’re on the best mortgage rates, and chasing the best cash savings rates."

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