UK inflation is estimated to have cooled to 2.7% in June, down from 2.8% in May, primarily driven by a significant drop in petrol and diesel prices, with the average price of a litre of diesel falling by over 16p. Monthly inflation is expected to be 0.1%, following a 0.2% increase in May. Core inflation, excluding volatile food and energy, is forecast to be 2.5% annually. The Office for National Statistics (ONS) will release the official figures on July 22, 2026.
While household energy inflation is believed to have temporarily decreased in June, economists anticipate this relief will be short-lived, as Ofgem's new energy price cap, which increased by 13% for typical household gas and electricity bills to $1,862 a year, took effect at the beginning of July. Despite this, the new Prime Minister, Andy Burnham, has announced that electricity bills will be VAT-free from October 1, saving households around $45 annually.
Falling oil prices in June, spurred by an interim ceasefire agreement in the Middle East, were a major factor in the lower inflation. However, Brent crude oil prices have rebounded in July due to escalating tensions, leading analysts like RSM UK's Thomas Pugh to predict inflation could still peak around 3.4% in November. Deutsche Bank's Sanjay Raja also warned of a "bumpy path ahead," citing potential rebounds in food prices later in the year due to higher energy and fertilizer costs stemming from the Middle East conflict. TD Securities expects headline CPI to slow to 2.7% year-on-year, with Core CPI at 2.6% and Services at 3.6%.
