The rate of inflation remained unchanged in July at 2.6%, despite forecasts that it would go up, led by a drop in fuel prices.
It means the Consumer Price Index measure of inflation (CPI) remains above the Bank of England’s inflation target of 2% – but is below economists’ predictions of 2.7%.
But the rate of Retail Price Index (RPI) inflation, which is used to set rail season ticket prices, rose to 3.6%, the Office for National Statistics said. It will be the highest increase in fares in five years.
CPI measures the growth in price of every day items including fuel, food, clothing and household goods.
Inflation has been accelerating largely thanks to the collapse in the pound following the Brexit vote, which makes imported goods more expensive.
The ONS said the main downward pressure last month came from a fall in fuel prices. Petrol fell by 1.4p month on month to 113.9p per litre, while diesel slipped by 1.7p to 115.6p per litre.
The decline was countered by increased food, clothing and electricity prices – following hikes by major energy suppliers.
Meat and other items such as sauces were more expensive in July, the ONS said.
James Tucker, ONS head of consumer price inflation, said: “Falling fuel prices offset by the costs of food, clothing and household goods left the headline rate of inflation unchanged in July.”
The figures are significant as they show a continuation in the squeeze on living costs as the pressure remains on the Bank of England to raise interest rates to combat rising prices.
Sky’s Economics Editor Ed Conway said the fact the rate held steady was “a little bit of a surprise”.
“This might be seen within the business community as something of a relief that we are not seeing as much pricing pressure some people had expected,” he said.
“But nonetheless, when you look at the backdrop to this, the fact that people are facing increases to their wages at a rate of about 2% and inflation being above that, it means that that squeeze on living standards – inflation running at a higher rate than earnings – that is starting to dig into people’s salaries and we are starting to see a fall in their standard of living.”
A Treasury spokesman said: “Although inflation is likely to start falling next year, we understand some families are concerned today about the cost of living.
“That is why we have given the lowest paid a pay rise through the National Living Wage and are cutting taxes for 31 million people.”