UK inflation softened last month, according to fresh data released on Wednesday, which could make the Bank of England's next interest rate decision a close call.
The Office for National Statistics revealed that the consumer price index (CPI) for June was up 7.9% compared to a year ago, easing from 8.7% the previous month and below the 8.2% that economists had forecast.
CPI inflation was up 0.1% on the previous month, which was also less than the 0.4% expected.
Core CPI inflation, which excludes food and fuel, softened to 6.9% from the 31-year high of 7.1% the previous month, which economists predicted would stay the same.
Much of the softening in inflation was put down to petrol and diesel prices falling 2.6% across the month, compared to the same period last year when they spiked almost 10% in the fallout from the Ukraine war.
There was also a marked slowdown in food inflation.
"Finally, we have some good news on UK inflation," said James Smith, an economist at ING.
"All in all, we now expect headline inflation to dip back to 6.6% in July, owing to the near-20% fall in household energy prices. Core inflation should slip back to roughly the same level too.
"Is this enough to convince the Bank of England to opt for a 25bp rate hike in August? We think it probably will – but it's going to be a close call," Smith added.
Economists at Morgan Stanley also viewed it as a "very close call" between a smaller hikes and a second straight 50 basis-point hike
Those at JPMorgan stuck with their call for a 25bps hike, saying today's inflation data "reduces the upside risk" around that forecast.
Markets were confident of the implications, with expectations for UK interest rates quickly adjusted, pricing an expected peak of around 5.75%, rather than the 6.5% that had been expected up until this morning.
With the Bank's current base rate standing at 5.0%, that would suggest the next meetings in August and September could see two quarter-point hikes to 5.25% and 5.5%, with a final rate rise in November or December to 5.75%.