UK inflation reached a 15-month low, providing an early positive impact for newly appointed Prime Minister Andy Burnham. In June, the inflation rate dropped to 2.6%, down from 2.8% in May, marking the lowest level since March 2025 and surpassing the economists’ 2.7% expectation.
The Office for National Statistics (ONS) attributed the decline to reduced fuel and food prices. Diesel prices decreased by 10.7p per liter between May and June, reaching 176.4p, while petrol prices fell by 2.1p per liter to 155.3p.
Furthermore, the inflation rate for food and non-alcoholic beverages declined from 2.2% to 1.7% during the same period, driven by items like chocolate, margarine, and beef. Clothing prices also saw a decrease as retailers initiated their summer sales.
Grant Fitzner, the ONS’s chief economist, highlighted the impact of lower motor fuel prices, particularly diesel, in alleviating inflation. He mentioned that food and clothing prices also contributed to the decrease, with the cost of raw materials experiencing a dip due to lower crude oil prices.
Despite the current relief, analysts anticipate a temporary situation, with inflation expected to rise in July following a 13% increase in the Ofgem energy price cap earlier this month. Sanjay Raja, Deutsche Bank’s chief UK economist, emphasized the uncertainty surrounding the energy disinflation path.
In a recent move, Andy Burnham announced a VAT reduction on electricity bills starting in October and a £2 bus fare cap effective from January. Newly appointed Chancellor John Healey highlighted the significance of falling inflation for households, emphasizing the ongoing efforts to support families’ financial well-being.
Inflation reflects the pace at which the prices of goods and services increase over time, impacting consumers’ purchasing power. The Bank of England maintains a target of 2% inflation and utilizes interest rates to manage price stability.
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