UK inflation eases to 15-month low in June after food and fuel prices fall

UK inflation fell to the lowest rate in 15 months in June as food and fuel prices dropped in an early boost to the cost-of-living-focused Andy Burnham.

The rate of Consumer Prices Index (CPI) was 2.6% in June, down from 2.8% in May, according to the Office for National Statistics (ONS).

This was the lowest level since March 2025, and also came in below the 2.7% rate that most economists had been expecting.

It means that average prices across the country are still rising, but at a slower rate than they were before.

The lower-than-expected CPI rate is set to provide some relief to new Prime Minister Mr Burnham who has made efforts to ease the cost of living a top priority.

According to the ONS, the biggest downward pull on overall inflation last month came from transport, food and non-alcoholic drinks.

Average petrol prices declined by 2.1p per litre between May and June, while diesel prices dropped by 10.7p per litre.

This marked the first time petrol had eased since the start of the Middle East conflict at the end of February, which sent oil and gas prices soaring and pushed up prices at the pumps.

However, while prices were lower month-on-month, overall motor fuel prices remained 21.3% higher in the year to June in a sign that the conflict has driven up the cost of living in the UK.

Food and non-alcoholic drink prices fell by 0.2% between May and June, bringing the annual inflation rate down to 1.7%, from 2.2% in May.

ONS chief economist Grant Fitzner said: “A fall in motor fuel prices, particularly diesel, helped ease inflation in June.

“Food prices fell this month, driven by products including chocolate, margarine and beef.

“Clothing prices also fell with the start of summer sales, with bigger discounts than last year.

“The cost of raw materials dipped for the first time since January, mainly due to the lower price of crude oil, while the increase in the costs of goods leaving factories slowed again.”

Newly appointed Chancellor John Healey said: “Falling inflation is news families want to hear but there is much more to do to give people the breathing space they need.

“That is why yesterday we cut VAT on electricity bills and today we’re announcing a £2 cap on bus fares from January.

“We have chosen to focus on the cost of living in our first week, signalling that concern for working people will be at the heart of everything we do.

“Both these changes are a win-win. They help keep inflation down while helping people afford the essentials.”

Mr Burnham and Mr Healey announced on Tuesday that electricity bills will be VAT-free from October 1, saving households about £45 a year.

Cutting VAT from 5% to 0% is estimated to reduce CPI inflation by around 0.1 percentage points when it comes into effect, according to the Government.

It comes amid forecasts that household energy prices will remain high throughout this winter, following a £221 jump to the price cap that took effect on July 1, raising it to £1,862 a year.

Experts have warned that this is set to push inflation higher from the summer.

Thomas Pugh, chief economist for RSM UK, said: “The dip in inflation to 2.6% in June is good news for households and should put to bed any lingering chance of an interest rate hike next week.

“However, this will mark the low point for this year.

“Rebounding energy prices, a wave of inflation coming through supply chains and a pickup in food prices will probably drive inflation to a peak of 3.3% in the autumn, even after the removal of VAT on energy bills.

“The obvious risk is that energy prices surge again, given renewed tensions in Iran and a hot summer, which could push inflation markedly higher.”

Charlotte O’Leary, associate economist for the National Institute of Economic and Social Research (NIESR), said the latest inflation figures will be welcomed by the new Prime Minister but warned that the “honeymoon period will be short-lived”.

“Next month’s data will uncover the impact of the long-awaited increase in Ofgem’s energy price cap, and with hostilities in the Middle East intensifying, putting wholesale energy prices under pressure again, we anticipate the October cap will remain elevated as we enter cooler months,” she said.