Inflation likely to have fallen in June – but it’s not all good news

UK inflation is anticipated to have eased in June, with official Consumer Prices Index (CPI) figures due to be published on Wednesday, offering a temporary boost for the new prime minister, Andy Burnham.

The expected slowdown in inflation, from 2.8% in May to an estimated 2.7% in June, is primarily attributed to a significant drop in petrol and diesel prices, with diesel falling over 16p per litre in June, the largest monthly decrease since 2000.

This decline in fuel costs was driven by news of an interim ceasefire deal between the US and Iran, which caused oil prices to fall below pre-crisis levels, alongside a temporary step-down in household energy inflation.

Despite the June easing, economists warn of a 'bumpy path' ahead, as the new Ofgem energy price cap, effective from July, increased typical household bills by 13% to £1,862 annually, and rising Middle East tensions have already pushed Brent crude oil prices up in July.

In response to cost-of-living pressures, prime minister Andy Burnham announced that electricity bills will be VAT-free from October 1, a measure expected to save households approximately £45 per year and reduce CPI inflation by around 0.1 percentage points.