A smaller fall in clothing prices on the month compared with a year ago was the main contributor to this rise in inflation, according to the ONS, and falling prices for food and non-alcoholic beverages partially offset the rise.
UK CPI printed slightly better than expected sending cable through the 1.5650 level in morning London trade as it markets speculated that UK disinflation may have troughed.
The muted gain in both headline and core CPI will “certainly give the Fed pause for thought in whether to raise interest rates or not at the next FOMC meeting in mid-September”, said Paul Ashworth, chief US economist at Capital Economics.
But BoE rate-setter Kristin Forbes said on Sunday that interest rates would need to rise long before inflation hits the BoE’s 2 percent target.
Average petrol prices between June and July this year rose by 0.1p and diesel fell by 2.5p, compared with a bigger rise for petrol last year and a flat month for diesel. Economists in a survey by Bloomberg, that delivers business and markets news had forecast the rate to stay at zero.
While rent inflation rose to its highest pace in over six years in June to 6.5 per cent y/y, upward price pressures in the last three months have diminished significantly.
But, while Brettell believes the number today will increase speculation that the Bank may move to raise rates later this year instead of next, it is unlikely to happen.
Despite subdued inflationary pressures, sterling has been underpinned in recent weeks by robust economic data, with British consumer demand holding up, wages rising and the pace of growth accelerating in the second quarter.
Ms McGowan said factors such as continued low oil prices and the strong pound could mean that an interest rate hike by Bank of England governor Mark Carney could be delayed until February next year.
Mr Miles, who cast his final vote as a member of the Monetary Policy Committee (MPC) earlier this month, told BBC Newsnight the time to lift rates from the record low of 0.5% was drawing closer.
“Indeed, with inflation muted and another wave of austerity set to hit the economy, we still think the MPC will hold off from raising interest rates until Q2 2016 and will increase Bank Rate to just one per cent by the end of next year”.
“We have a substantial gap between UK and the U.S. rate expectations, so the question is: is this gap in rate expectations justified or not?” said Morgan Stanley’s global head of FX strategy Hans Redeker.