UK inflation fell to 2.6% in June, down from 2.8% in May and marking the lowest reading since March 2025. The decline beat economists' expectations for a 2.7% rate, driven primarily by falling energy costs as petrol prices dropped 2.1p per litre and diesel fell 10.7p per litre between May and June, a move linked to de-escalation in the Iran conflict.
Food and non-alcoholic drink prices also contributed to the slowdown, with annual inflation in the category easing to 1.7% from 2.2% the previous month. On a monthly basis, consumer prices edged up just 0.1% in June.
The relief may prove temporary. The Bank of England projects inflation will climb back to 3% in the third quarter, though a planned cut in VAT on electricity bills to zero from October may help offset upward pressure later in the year.