UK inflation dropped to a 15-month low, providing an early boost for newly appointed Prime Minister Andy Burnham. In June, the inflation rate decreased to 2.6%, down from 2.8% in May, marking the lowest level since March 2025 and surpassing economists’ expectations of 2.7%.
According to the Office for National Statistics (ONS), the decline in inflation was attributed to lower fuel and food prices. Diesel prices fell by 10.7p per liter from May to June, reaching 176.4p, while petrol prices decreased by 2.1p per liter to 155.3p.
The inflation rate for food and non-alcoholic beverages also declined from 2.2% to 1.7% between May and June, influenced by price drops in products like chocolate, margarine, and beef. Additionally, clothing prices decreased as retailers initiated summer sales.
Grant Fitzner, the ONS’s chief economist, noted that the reduction in motor fuel prices, particularly diesel, contributed to the inflation easing in June. He highlighted that food prices, including chocolate, margarine, and beef, experienced declines, alongside discounted clothing prices due to summer sales.
Despite the temporary relief, analysts anticipate a rebound in inflation in July following a 13% increase in the Ofgem energy price cap at the beginning of the month. Sanjay Raja, Deutsche Bank’s chief UK economist, mentioned the uncertainty in the energy disinflation path despite being far from the peaks observed during the Iran conflict.
In related news, Andy Burnham announced a VAT reduction on electricity bills starting in October and a £2 cap on bus fares effective from January. Chancellor John Healey emphasized the importance of addressing cost of living concerns and highlighted the government’s focus on supporting working families through these measures.
Inflation reflects the rate at which prices of goods and services increase over time. When inflation decreases, it indicates a slower rise in prices rather than a halt in price increases. The Bank of England aims for 2% inflation and uses interest rates to manage price growth.
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