Britain's key inflation gauge was unchanged in June from a month earlier, but came in slightly above expectations.

The consumer price index, or CPI, rose 2.0 percent from a year ago, the Office for National Statistics said today, in line with the Bank of England's target, but above experts’ forecast for 1.9 percent. On a month-on-month basis, prices rose by 0.1 percent.

Core inflation — which excludes more volatile items like energy, food, alcohol and tobacco — rose by 3.5 percent on year, unchanged from May. While goods prices were down 1.4 percent on the year, services inflation remained stuck at 5.7 percent.

Owner-occupiers’ housing costs, a measure of costs linked to owning a home which includes mortgage expenses, taxes and insurance, was the highest ever in the ONS data series that goes back to 1992. It rose by 6.8 percent in the 12 months to June, up from 6.7 percent in May.

The U.K.’s inflation rate is now in line with or below that of many other European economies, such as Germany and France, after a period in which it outpaced both them and the U.S.

Moreover, there was evidence of ‘pipeline’ pressure easing too, as factory gate price growth slowed to 1.4 percent on the year in June, having accelerated for the last four months. Producers’ input prices also fell 0.8 percent on the month, by more than expected.

However, the persistent problems with services and housing — the latest example of a trend affecting almost all advanced economies — mean there is still no certainty that the Bank of England will cut interest rates at its next Monetary Policy Committee meeting on August 1. That will be the first MPC meeting since the new Labour government took office.

“Stickiness in services inflation – a key measure of domestic inflationary pressures – lowers the likelihood of an August rate reduction,” said Anna Leach, chief economist at the Institute of Directors, in e-mailed comments, noting that the numbers make tomorrow's set of labor market numbers, which will include wage data for May, particularly important.

The ONS's measure of average earnings growth was running at 6.0 percent in May, a level well above what the Bank considers consistent with 2 percent inflation. However, the ONS figures have been dogged in recent years by methodological problems, making them a less reliable guide to actual trends. Other indicators tracked by the Bank, such as its own Decision Maker Panel, show wage growth weakening, but only slowly.

Simon French, chief economist with Panmure Gordon, agreed via X that there was “more for the hawks” at the BoE than for those pressing for immediate rate cuts. He pointed to the fact that services inflation is being driven by the hotel and restaurant sectors, owing to the combination of strong demand and a shortage of workers.

However, others pointed out that the strength in those sectors may have been exaggerated in June by the timing of Taylor Swift’s concerts in London. The touring U.S. star has had a similar impact on prices in other countries, prompting a temporary surge in hotel stays and eating out.