Britain's rate of consumer inflation held steady in July as the negative impact on price growth from falling petrol prices offset rising gas and electricity costs and other goods and services.
Falling or weaker petrol prices had the largest negative impact on inflation, but the weaker pound, which fell dramatically in the wake of last year's referendum vote to leave the European Union, continued to fuel rises in the prices of imported goods and services.
Consumer price inflation (CPI)
Headline CPI for July remained at an annual rate of 2.6%, unchanged from the June level, and lower than the forecast rise to 2.7%.
Month on month, consumer prices fell 0.1% thanks mainly to the lower prices of petrol and diesel.
But inflationary pressures remained as the weak pound raised the cost of imports, while clothing, food and household goods and services all experienced price increases.
Inflationary pressures were also building at the producer level. The weak pound increases costs to manufacturers of raw materials and while the annual input cost measure of producer prices fell to 6.5% from 10%, the output price index at 3.2% was above expectations of 3.1%.
The Office for National Statistics, which compiled the inflation data, said there were reports that businesses were taking out measures to protect against the impact of exchange rate inflation rather than pass on cost increases to customers.
"Risks remain skewed towards inflation rising in coming months," said Chris Williamson at IHS Markit.
He added: "Although official data showed producer input prices inflation cooled, more recent gauges of commodity prices, such as the IHS Materials Price Index, have been rising again in recent weeks."
Households feel the pinch
It has been impossible to look at price inflation in isolation over the past few months, as the other half of the inflationary equation – wage growth – is persistently outpaced by rising prices.
Data tomorrow are expected to show that average annual earnings grew at 1.8% in June – the same rate as in May.
A significant gap would therefore remain between prices and wages that could start to have a serious impact on overall economic growth if employers continue to dawdle over wage increases.
Williamson added: "Risks remain biased towards the economy slowing further after a weak first half of 2017, with consumer spending damped at the same time as business spending is hit by rising anxiety about Brexit."
The data added fuel to expectations that the Bank of England will be in no hurry to raise interest rates.
"It seems unlikely we will see an interest rate hike anytime soon, as ongoing concerns over the UK’s Brexit negotiating position compounded by a slowing domestic economy weigh on both business and consumer confidence," said Jake Trask, FX research director at OFX.
The pound fell 0.3% against the dollar to $1.2925. Earlier gains against the euro were eroded and by mid-morning the pound had slipped 0.1% against the single currency to €1.0990.