UK Inflation Falls to 2.6% on Cheaper Fuel and Food
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- UK inflation fell to 2.6% in the year to June, down from 2.8% in May, according to the Office for National Statistics.
- ONS chief economist Grant Fitzner attributed the decline primarily to falling motor fuel prices, especially diesel, alongside cheaper food and clothes driven by deeper start-of-summer sales discounts than last year.
- Food and non-alcoholic beverage prices dropped 0.2% month-on-month, led by sugar, chocolate and confectionery, while meat and vegetable prices rose but by less than a year earlier.
- Suren Thiru of the Institute of Chartered Accountants in England and Wales called the June figure a "false dawn," warning that an upcoming Ofgem price cap increase and renewed Iran-related crude oil spikes could push inflation back up.
- Thiru said the June data "quash[es] any lingering prospect" of a Bank of England interest rate hike in July.
- Food inflation typically lags by up to 13 months, meaning any supply-chain effects from the war in Iran may not yet be visible in the figures.
Why it matters: UK households and the new Chancellor get a brief reprieve with headline inflation at 2.6%, but the relief looks fragile: Ofgem's price cap rise, resumed Iran-US hostilities lifting crude oil, and a 13-month food price lag could reverse the trend within months, squeezing fiscal headroom and borrowing costs.
