Full Breakdown
UK Inflation Falls to 15-Month Low in June 2026
7/26/2026, 5:32:28 AM
June 2026 Inflation Drop
The Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) was 2.6 % in the 12 months to June 2026, down from 2.8 % in May. The slowdown marks the lowest annual rate since March 2025 and undercuts the 2.7 % forecast of most economists. Monthly CPI rose only 0.1 % in June, compared with a 0.3 % increase a year earlier.
Drivers of the Decline
ONS data identified transport, food and non-alcoholic beverages as the largest downward contributors. Average petrol prices fell by 2.1 pence per litre and diesel by 10.7 pence per litre between May and June, delivering the first month-on-month fuel-price easing since the Middle-East conflict began in February. Food and drink prices slipped 0.2 %, pulling the food-inflation rate to 1.7 % (down from 2.2 %). ONS chief economist Grant Fitzner explained that lower motor-fuel prices, a dip in raw-material costs, and slower factory-gate price growth all helped ease inflation.
Political Response
New Prime Minister Andy Burnham framed the data as validation of his cost-of-living agenda. He announced that electricity bills will be VAT-free from October 1, saving households about £45 a year. Burnham also confirmed a £2 cap on bus fares across England, to start in January. Chancellor John Healey echoed the sentiment, calling the drop “news families want to hear” and stressing that the measures are “a win-win” for keeping inflation down while helping people afford essentials.
Market and Analyst Outlook
British Retail Consortium economist Harvir Dhillon said the decline benefits households but warned retailers face “immense financial pressure” from higher National Insurance, the triple-packaging tax, and input-cost spikes tied to the Iran conflict. Thomas Pugh, chief economist at RSM UK, attributed the June dip mainly to falling oil prices after an interim ceasefire, yet cautioned that rebounding oil could push inflation toward 3.4 % by November. Sanjay Raja, chief UK economist for Deutsche Bank, highlighted uncertainty in the energy-disinflation path and the risk of food-price rebounds from higher energy and fertilizer costs.
What’s Next
The Bank of England is expected to keep its benchmark rate at 3.75 % as it assesses the impact of the Middle-East conflict on energy prices. The Ofgem energy-price cap is set to rise by 13 % in July, which could lift household energy bills by roughly £221 a year. Analysts agree that the June easing may be temporary, with future inflation hinging on the trajectory of global oil markets and the government’s fiscal choices.
Verbatim Quotes
- “I think the public is coming to grips with, ‘Well, I’m hearing inflation has slowed, but things aren’t getting any cheaper.’ It has to be deflation for prices to go down, and that’s very rare,” — Matt Hamory
- “There’s less competitive force on the feather side of the mountain,” — Jared Bernstein
