The data from the Office for National Statistics showed that clothing and footwear prices fell by 2.1 percent between May and June, the biggest decline for the month since 2012.
"The pound dropped sharply on the (inflation) news, losing around three-quarters of a cent against the dollar as traders revised their bets on an August rate rise", noted Ben Brettell, senior economist at Hargreaves Lansdown.
'Even if the Bank of England does deliver on a rate hike in August, any further rate hikes are likely to be at a "gradual pace and to a limited extent" so it will be some time before interest rates catch up with inflation'.
Ed Monk, associate director for personal investing at Fidelity International, said: 'If inflation does jump back up after this weakening in pay growth, then it adds to the conundrum for the Bank of England's Monetary Policy Committee who are desperate to deliver a rate hike in August's MPC meeting.
'However, gas and electricity and petrol prices all rose, with consumers seeing the highest price at the pump for almost four years, with inflation remaining steady overall'.
The pound dropped sharply after the inflation data, falling 0.7% against the U.S. dollar at 1.30 and was 0.3% lower at 1.12 euros. The Bank has a target of 2% for inflation set by the government.
Households were also squeezed by gas and electricity costs, which rose 2.5% and 2.2% respectively, month on month.
But some relief emerged for consumers on the high street, where clothing discounts - most strongly felt in men's apparel - left more cash in shoppers' wallets.
"Petrol prices rose by 2.7 pence per litre between May and June 2018 to stand at 128.0 pence per litre in June, the highest average price since September 2014", the ONS said in its release.
The cost of raw materials - many of them imported - was 10.2 per cent higher than in June 2017, the strongest rise in a year. This was due to higher prices of cereals, wheat, vegetables, potatoes, non-food articles, fibers, and minerals.
Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, expects a stronger reading to match February's figures. While these came through, they were offset by falling prices for clothes and games. Core inflation was significantly weaker than expected at 1.9 per cent year-on-year, which will make it more hard for the Bank of England to raise rates, particularly given a backdrop of Brexit and trade uncertainty.
"Now it looks odds-on that the MPC will hold fire yet again. The Bank will be mindful of Brexit-related uncertainty, and may decide to wait for confirmation that the weak first-quarter growth figure was just a blip before raising borrowing costs".