Eric Pickles said he was "relaxed" about the Liberal Democrats blocking his bid to force more local authorities to put council tax rises to a referendum.
The Local Government Secretary said that he had wanted all increases of more than 1% to trigger a public vote as he seeks to encourage town halls to freeze rates.
But even his compromise of a 1.5% level was vetoed by Deputy Prime Minister Nick Clegg over fears that it could hit "vital" services.
A source close to Mr Clegg said councils had already been "cut to the bone" and needed to be given more certainty.
"I would have preferred a threshold of 1% but I was quite willing to compromise on 1.5%," Mr Pickles told BBC Radio 4's The World at One.
"But 2% I am relaxed about."
The average bill for a band D property was £1,444 last year, meaning a 2% increase would cost householders around £7.20 more than a 1.5% rise.
Mr Pickles has previously signalled his desire to deal with "democracy dodging" councils who raise council tax by 1.99% to avoid a referendum.
He insisted he was not seeking to set a cap and was also "relaxed" about inflation-busting rises of 7% or more, so long as they were approved by local electors.
"There seems to be a view that the referendum amount is a cap. It isn't.
"I'm very relaxed if a council wants to go for 5%, 6%, 7% even more providing it gets the consent of its electorate.
"I think in the long-term this will become the norm, that councils will present a budget, the electorate and people will get an opportunity to decide."
The coalition has tried to keep council tax down in two main ways - by offering financial top-ups to authorities who pledge freezes and by insisting on local referendums.
Confirming the retention of the 2% threshold, Mr Pickles told MPs that 137 authorities had so far signalled their intention not to raise the rate of council tax for 2014/15.
Budgets are due to be finalised next month.
"Since 2010, council tax bills have been cut by 10% in real terms across England and people haven't been facing the threat of soaring bills," he said in a written statement.
"I would urge councils to take up the offer of additional funding to help freeze council tax this year to help their residents with the cost of living."
He encouraged voters to lobby their local councillors to back a freeze via social media.
The Local Government Association said the uncertainty over the level of the threshold had made it harder for town halls to finalise budget and criticised the extra cost burden of a referendum at a time when severe funding cuts were already damaging services.
LGA finance panel chair Sharon Taylor said: "Local authorities are striving to keep council tax down but at the same time are grappling with the difficult task of protecting vital services like caring for the elderly, fixing the roads and waste collection following a 40% reduction in Government funding over this Parliament.
"Many councils have already finalised their budgets for the coming financial year and the lateness of this announcement has added to the uncertainty faced by local authorities making crucial decisions about how local services will be provided from April.
"It should be for councils and their residents to decide how local services are paid for, not Whitehall.
"No other tax increase is subject to the extra cost of a referendum, as all other taxes are rightly seen to be within the mandate of the elected government.
"The same should apply for council tax."
Mr Pickles said a referendum could be held at "minimal extra cost or inconvenience" if it was conducted on the same day as European and local elections on May 22.
He played down reports that a number of Conservative-run county councils were planning a tax rise - saying several leaders had called him to insist they intended to adopt the freeze.
And he dismissed suggestions that Home Secretary Theresa May had joined forces with the Lib Dems to block his tougher referendum proposal.
"I can't imagine Theresa did because of course we never considered the police authorities being anything less than 2%," he told the BBC.
The row is the latest sign of growing tensions between the coalition parties, as they seek to differentiate themselves in the final lap of the electoral cycle.