UK inflation dropped to its lowest level in 15 months in June as food and fuel prices declined, delivering an early boost to cost-of-living-focused Andy Burnham.
The Consumer Prices Index (CPI) rate stood at 2.6% in June, falling from 2.8% in May, according to the Office for National Statistics (ONS). This represented the lowest figure since March 2025, and also came in beneath the 2.7% rate that the majority of economists had anticipated.
The better-than-expected CPI figure is poised to offer some respite to new Prime Minister Mr Burnham, who has placed easing the cost of living at the very heart of his agenda.
Key drivers of falling inflation
The ONS revealed that the greatest downward pressure on overall inflation last month stemmed from transport, food and non-alcoholic drinks.
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.”
Fuel and food prices
Average petrol prices fell 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.
Nevertheless, while prices were lower month-on-month, overall motor fuel prices remained 21.3% higher in the year to June, highlighting how the conflict has driven up living costs across 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.
Government measures
Mr Burnham and Mr Healey revealed on Tuesday that electricity bills will become VAT-free from October 1, saving households approximately £45 annually. Reducing VAT from 5% to 0% is projected to lower CPI inflation by roughly 0.1 percentage points when implemented, according to Government estimates.
