UK inflation fell to 2.6% in June, offering a modest lift for households and businesses after months of stubborn price pressure. The latest figures point to lower fuel and food costs as the main reasons behind the slowdown, although economists warned the relief may not last long.
The Office for National Statistics said the annual rate of CPI eased from 2.8% in May to 2.6% in June, with transport costs and motor fuels helping to drag the headline rate lower. Food and non-alcoholic drink inflation also softened, adding to the sense that some of the sharpest price pressures are easing.
James Burgess, Head of Commercial at Atradius, said: “The relief of a dip in inflation is likely to be short-lived. Bank Rate remains at 3.75%, energy bills rose sharply in July, and volatile oil prices could push inflation back up again.”
He added: “Cost pressures have eased thanks to lower fuel costs, but they have not disappeared. Managing liquidity and customer credit risk will be vital for resilience.”
Emeritus Professor Joe Nellis, economic adviser at MHA, said the reading was “welcome news for the incoming Prime Minister and Chancellor” as they shape their policy agenda. He warned, however, that the figures should not be mistaken for proof the economy is secure, noting that inflation remains above the Bank of England’s 2% target and that the UK is still vulnerable to external shocks.
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Dr Liliana Danila, Chief Economist at the Food and Drink Federation, said: “It’s positive to see food and drink manufacturers keeping food prices stable despite rising input costs.” She added that disruption is now “the new norm” and called on the new Prime Minister to treat food security as a priority.
Felix Feather, Economist at Aberdeen Investments, said June’s figures offered “some welcome relief for policymakers”, but cautioned that the improvement is likely to be temporary. He said lower petrol and diesel prices helped pull inflation down, but expected energy costs to push inflation higher again later in the year.
The softer reading may ease immediate pressure on the Bank of England, but policymakers are likely to remain cautious while services inflation and wider domestic cost pressures stay sticky. For consumers, the June data offers a small improvement, but not yet a full escape from the cost-of-living squeeze.
