UK inflation slowed to a three-month low and factory gate inflation skid to its weakest level in six months in June, defying calls for an immediate interest rate hike.

Consumer prices advanced 2.6 percent year-on-year in June, following a 2.9 percent rise in May, data from the Office for National Statistics showed Tuesday.

Inflation was expected to remain unchanged at a nearly four-year high of 2.9 percent. Nonetheless, the figure was clearly above the 2 percent target. The latest slowing was driven by motor fuel and recreation goods.

Core inflation that excludes energy, food, alcoholic beverages and tobacco also slowed in June, to 2.4 percent from 2.6 percent a month ago.

Even if inflation does recover, ING Bank economist James Smith expects the weaker pound to ultimately keep headline inflation in the 2.5-3 percent region for the rest of this year. The decision to hike rates still hinges on the growth outlook, the economist noted.

The BoE's next decision is widely expected to be 'hold' after inflation eased unexpectedly in June. The bank is scheduled to issue its growth projections and inflation outlook on August 3.

The consumer price index including owner occupiers' housing costs climbed 2.6 percent in June versus 2.7 percent in May. This was the first fall in the annual rate since April 2016.

Month-on-month, the overall CPI remained flat, while economists had forecast a 0.2 percent gain.

Another report from the ONS showed that output price inflation eased to the lowest level so far this year in June.

Output price inflation fell more-than-expected to 3.3 percent annually in June from 3.6 percent in May. This was the weakest since December 2016 and below the expected 3.4 percent.

Compared to the previous month, output prices remained unchanged compared to the expected growth of 0.1 percent. June 2017 was also the first time in 17 months that the monthly rate has not grown, the ONS said.

At the same time, input price inflation tumbled to 9.9 percent from 12.1 percent a month ago. However, the rate was faster than the 9.3 percent forecast.

June's 9.9 percent increase was the slowest the rate has grown since September 2016, when it was 7.6 percent.

On a monthly basis, input prices fell for the third month in a row. Prices slid 0.4 percent but smaller than the forecast of 0.9 percent.

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