UK inflation declined to 3.2% in June from 3.4% in May, according to the Office for National Statistics.

This is the second monthly fall but means that the Consumer Prices Index is still significantly over the Bank of England’s target of 2%.

The Retail Prices Index (RPI) inflation - the measure widely used in pay negotiations - also fell to 5% from 5.1% year-on-year in May.

“Headline CPI inflation fell in line with expectations but it is worrying that core inflation, which strips out energy and food, has risen. While the MPC cannot ignore the risk that inflationary expectations might worsen, it would be a mistake to overreact to these figures by raising interest rates,” said David Kern, chief economist at the British Chambers of Commerce.

“The government’s tough deficit-cutting programme will considerably dampen demand in the economy, and wage pressures appear weak. If the MPC were to consider raising interest rates in these circumstances, risks of a double-dip recession would increase.”