UK prices remained in line with the Bank of England's target last month, but persistently high services sector inflation is expected to hold back the central bank from cutting rates next month, economists and analysts said.
The consumer price index (CPI) rose 0.1% over June, as expected, which meant the annual rise in CPI remained at 2.0% for the second month running.
Core CPI at 3.5% and services CPI at 5.7% meant the Bank's monetary policy committee is expected to postpone any rate cut until September.
The market cut its view of the probability of an August rate cut to around 25% but increased it to 74% for September.
Some banks and other commentators said the MPC should cut at the 1 August meeting, including Barclays, which said while services CPI was "stickier than expected" core goods were in outright deflation and it was retaining its call for an August cut, "but the upside surprise makes tomorrow's labour market data crucial".
BNP Paribas economists said it also still expects the BoE to begin cutting interest rates in August, "as it looks beyond spot data and emphasises the medium-term outlook.
"However, in our view, risks have been tilted toward a delayed start to the easing cycle by the latest inflation print... Below the surface, we think Wednesday’s data showed signs of a gradual easing in domestic inflationary pressures.
"This, coupled with further progress in core goods, may provide some comfort to the BoE ahead of its rate-cutting cycle."
Rob Wood at Pantheon Macroeconomics said CPI services inflation is 60 basis points stronger than the MPC's forecast for June, which supports his prediction for rates to be kept on hold in August and cut in September.
"That remains, however, a very close call," he said. "Rate setters will look through the upside surprise in June because it was driven by a surge in domestic hotel and live music event prices that will likely unwind.
"Without the leap in those components, services inflation would have slowed and so would headline CPI inflation."