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 the economists’ expected rate of 2.7%.
The Office for National Statistics (ONS) attributed the decline to reduced fuel and food prices. Diesel prices fell by 10.7p per litre from May to June, reaching 176.4p, while petrol prices decreased by 2.1p per litre to 155.3p.
The inflation rate for food and non-alcoholic beverages also declined from 2.2% to 1.7% between May and June, driven by price drops in items such as chocolate, margarine, and beef.
Clothing prices saw a decrease as retailers launched their summer sales. Grant Fitzner, the chief economist at ONS, stated that lower motor fuel prices, especially diesel, contributed to easing inflation in June. Food prices were also impacted by reductions in products like chocolate, margarine, and beef, while clothing prices saw more substantial discounts during summer sales compared to the previous year.
However, analysts cautioned that the relief might be temporary, with inflation expected to rise again in July following a 13% increase in the Ofgem energy price cap at the beginning of the month. Sanjay Raja, the chief UK economist for Deutsche Bank, highlighted the uncertainty in the energy disinflation path despite being far from the levels seen during the peak of the Iran conflict.
The latest inflation figures coincided with Mr. Burnham’s announcements of a VAT cut on electricity bills starting in October and a £2 cap on bus fares from January. Newly appointed Chancellor John Healey emphasized the importance of these measures in providing relief to families and addressing the cost of living challenges.
Inflation indicates the rate at which the prices of goods and services increase over time. When inflation decreases, it signifies that prices are still rising, but at a slower pace than before. The Bank of England maintains a 2% inflation target and adjusts interest rates to manage price increases.