British inflation holds steady at 2 percent target in June

LONDON

Britain's inflation rate held steady in June after returning to the Bank of England's target the previous month, official data showed on Wednesday, confounding expectations for another modest slowdown.

The Consumer Prices Index was unchanged at 2 percent in June from the same level in May, the Office for National Statistics said in a statement, compared with market forecasts of 1.9 percent.

"Hotel prices rose strongly, while second-hand car costs fell but by less than this time last year," said ONS chief executive Grant Fitzner.

"However, these were offset by falling clothing prices, with widespread sales driving down their cost.

Analysts said the data could cause the Bank of England to sit tight for a while longer before starting to cut interest rates.

"The chances of an interest rate cut in August have diminished a bit more," said Paul Dales, chief U.K. economist at research consultancy Capital Economics.

Last month, the BoE kept its key interest rate at a 16-year high of 5.25 percent, despite slowing inflation in May.

Britain's newly elected Labour government welcomed news that inflation remained at the BoE's target level.

"It is welcome that inflation is at target," said Darren Jones, Chief Secretary to the Treasury, in a statement.

"But we know that for families across Britain prices remain high... [which] is why this government is taking the tough decisions now to fix the foundations" of the U.K. economy, he said.

Labour, led by new Prime Minister Keir Starmer, has pledged immediate action to grow the economy after the center-left party won a landslide general election victory to end 14 years of Conservative rule.