UK inflation eased more than expected in June, providing newly appointed Prime Minister Andy Burnham with an early economic boost as slowing price growth offered temporary relief from the country’s prolonged cost-of-living crisis.
According to the Office for National Statistics (ONS), consumer prices increased by 2.6 per cent year-on-year in June, down from 2.8 per cent in May and marking the lowest inflation rate since March 2025.
The figure came in below economists’ forecast of 2.7 per cent, driven largely by lower petrol prices following a temporary easing of tensions in the Middle East and a decline in energy costs.
Despite the improvement, economists warned that the decline in inflation may be short-lived, as renewed geopolitical tensions have pushed global energy prices higher, raising the risk of fresh inflationary pressures in the months ahead.
Commenting on the latest figures, ONS Chief Economist Grant Fitzner said:
“A fall in motor fuel prices, particularly diesel, helped ease inflation in June.”
He added:
“The cost of raw materials fell for the first time since January, largely due to lower crude oil prices, while the increase in factory gate prices continued to slow.”
The latest data places UK inflation below that of both the United States, where inflation stood at 3.5 per cent, and the eurozone, which recorded 2.8 per cent.
However, the UK remains vulnerable to fluctuations in global energy markets because of its heavy reliance on imported natural gas, leaving households and businesses exposed to rising energy costs.
Although inflation has moderated, it has remained above the Bank of England’s 2 per cent target for much of the past five years. The central bank has previously warned that inflation could climb to 3 per cent during the third quarter of the year.
Services inflation—closely monitored by the Bank of England as an indicator of underlying price pressures—also eased slightly to 3.6 per cent in June from 3.7 per cent in May. However, the figure was marginally above economists’ expectation of 3.5 per cent.
Financial markets widely expect the Bank of England to keep its benchmark interest rate unchanged at 3.75 per cent when policymakers meet next week, as they continue to assess domestic inflation trends alongside global economic and geopolitical developments.
Yael Selfin, Chief Economist at KPMG, said the latest inflation figures support a cautious approach to monetary policy, noting that underlying price pressures remain relatively contained despite weak domestic demand.
Nevertheless, some members of the Bank of England’s Monetary Policy Committee, who voted to raise borrowing costs in June, remain concerned that inflation could continue to exceed the central bank’s target.
Financial markets on Tuesday also priced in the possibility of one or two quarter-point interest rate increases before the end of 2026.
The inflation figures follow data released last week showing that the British economy performed slightly better than expected in May, offering further encouragement for Burnham’s administration, which assumed office on Monday.
Since taking office, the new government has announced measures aimed at easing the cost-of-living burden, including plans to reduce household energy bills and lower the cap on bus fares.
Separate economic data released on Tuesday also indicated a stabilising labour market and lower government borrowing in June, reinforcing optimism that the UK’s economic outlook is gradually improving despite persistent global uncertainties.
