“Inflation ticking down again is a reminder that in today’s geopolitical climate, mortgage rates don’t stay predictable for long,” said Ben Thompson (pictured right), director of home moving strategy at Mortgage Advice Bureau. “This drop puts the Bank of England’s next move back in the spotlight – albeit we currently expect no further increase to the base rate, as domestic economic performance still remains weak.”
The ONS attributed the monthly decline primarily to lower fuel and food prices. “A fall in motor fuel prices, particularly diesel, helped ease inflation in June,” said Grant Fitzner, chief economist at the ONS. “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.”
Economists had forecast a fall to 2.7%, making June’s outturn a modest beat. Core CPI, which excludes energy, food, alcohol and tobacco, held steady at 2.6%. The CPI goods annual rate eased from 2% to 1.7%, while services inflation edged down from 3.7% to 3.6%. On a monthly basis, CPI rose 0.1%, compared with 0.3% in June 2025.
The data offer a short-term reprieve for Prime Minister Andy Burnham, who has made reducing the cost of living a central policy commitment. However, analysts warn that inflation is likely to rebound in July after the Ofgem energy price cap rose by 13% at the start of this month. Burnham has separately announced a VAT cut on electricity bills from October.
“This fall in inflation is a surprise, and likely to be a temporary respite, given the forecasts for the rest of the year,” said Alex Beavis (pictured right), interim director of banking at LHV Bank. “Those inflation worries are being driven by the conflict in Iran, showing how events thousands of miles away can have a very real impact on the pounds in your pocket. Inflation is being targeted by the new Prime Minister and Chancellor, with measures such as scrapping VAT on electricity bills already announced.”