Investors scaled back bets on an August Bank of England base rate cut after fresh data showed signs of persistent inflation pressures in some areas of the economy.

Consumer price inflation held at the BoE's target of 2 per cent in June, unchanged on the previous month but marginally higher than the 1.9 per cent forecast by economists, according to the Office for National Statistics.

And while the headline inflation measure remained at target, a core inflation reading of 3.5 per cent and a services inflation rate of 5.4 per cent demonstrated the danger of resurgent price pressures.

Prior to the data's publication markets had been pricing a roughly 50-50 chance the BoE's Monetary Policy Committee would vote for an August base rate cut, lowering it from its current level of 5.25 per cent by 25 basis points to 5 per cent.

But after the data's release the pound rallied and markets were pricing in just 9bps of cuts, according to ING, meaning most investors do not think a cut will take place.

Economics director at chartered accountant trade body ICAEW, Suren Thiru said: 'While anxiety over underlying price pressures keeps the prospect of an August interest rate cut on a knife edge, these figures should at the very least drive a more dovish [MPC] vote split to signal that rate cuts are imminent.'

Core and services inflation have consistently proved resilient against BoE base rate hikes and have previously frustrated attempts to get the headline CPI rate down to target.

The core rate, which is down from a 32-year high of 7.1 per cent in May 2023, is itself largely being driven by services inflation.

The CPIH all services index rose by 6 per cent in the 12 months to June 2024, slightly up from 5.9 per cent in May.

While this figure is skewed by booming prices of 'package holidays and accommodation', according to the ONS, services inflation is broadly being driven by high wage inflation.

Britons have successfully bagged pay rises throughout most of the economy, helping their spending power to overtake the CPI rate but in-turn pushing up the overall price pressures.

Annual wage growth before bonuses was at 6 per cent in the three months to the end of April, unchanged on the previous quarter.

The ONS will provide an update on wage growth on Thursday, with the BoE hoping to see the rate fall.

Deputy chief economist at Abrdn, Luke Bartholomew, who thinks the BoE will still opt for a base rate cut next month said: 'The ongoing stickiness of services inflation will leave the Bank wondering how long inflation will stay at the 2 per cent target once favourable base effects have passed and domestic price pressures start to drive headline inflation again.

'Tomorrow's wage data will provide more clues about these price pressures, and the Bank will hope to see a further moderation in wage growth.'

Investment officer at Close Brothers Asset Management Isabel Albarran is betting the BoE will wait for its September MPC meeting to pull the trigger on interest rate cuts.

'However, economic growth has been more resilient than expected and this is troubling some members of the committee,' she said. 'Added to this is the fact that base effects are likely to push inflation higher over coming months, rather than being a persistent downward force, as has been the case in recent months.

'Nonetheless, the Bank has made it clear that there is scope for cuts without making policy accommodative.

'The August Monetary Policy Report will provide new forecasts and a key insight into the Bank's thinking ahead of September.

'We continue to monitor our checklist: a change in guidance, a change in the votes, and CPI below 2 per cent at the end of the forecast.'