London, July 17 (BridgeNews) - U.K. consumer price inflation remained at two-year highs in June, making it less likely that the Bank of England will cut interest rates to fend off the global economic slowdown. The target measure of inflation, which excludes mortgage payments, was 0.25 on the month and 2.4% on the year, figures from the Office for National Statistics showed.
Analysts had expected inflation to drift back to 2.3% after May's spike to 2.4%.
Although the measure is just below the Bank of England's 2.5% target, it remains at its highest yearly rate since March 1999.
The bank cut its benchmark repo lending rate to 5.25% in May from 6.0% in January to boost the U.K.'s economic growth in the face of a weaker outlook worldwide.
Downward pressure from cheaper gasoline was offset by more expensive non-seasonal food, clothing and footwear and leisure goods, the ONS said. "I'm a little bit disappointed," said Brian Hilliard, economist at Societe Generale. "I expected some improvement on the food side. But I think we'll see better data in the next month or two and I still think 2.4% overstates underlying inflation."
Headline inflation in June was 0.1% on the month and 1.9% on the year in June. By far the biggest downward effect came from lower mortgage costs, which are stripped out of the RPIX measure.
EU-harmonized inflation was an annual 1.7%, unchanged from last month. The figures suggest retail discounting is weaker than last year, particularly for non-seasonal food and clothing. This tallies with signs that retailers are enjoying stronger demand than last year.
Non-seasonal food prices added 0.04 percentage points to the annual rate of inflation, making the single biggest upward contribution.
Seasonal food prices also increased but had a negligible effect on the overall annual rate change. Extreme weather conditions over the last year have made it difficult to predict crop sizes and their resulting impact on prices.
The big effect on the downside came from housing, as lower mortgage costs fed through to the index.