Millions of households have been handed a welcome cost-of-living boost after UK inflation fell further than expected to its lowest level in 15 months.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation slowed to 2.6% in June, down from 2.8% in May and below the 2.7% forecast by economists.
It is the third consecutive monthly fall in inflation and the lowest reading since March 2025, providing encouraging early economic news for Prime Minister Andy Burnham and newly appointed Chancellor John Healey.
Mr Healey said: “Falling inflation is news families want to hear, but there is much more to do to give people the breathing space they need.
“That is why yesterday we cut VAT on electricity bills, and today we’re announcing a £2 cap on bus fares from January.
“We have chosen to focus on the cost of living in our first week, signalling that concern for working people will be at the heart of everything we do.
“Both these changes are a win-win. They help keep inflation down while helping people afford the essentials.”
Grant Fitzner, chief economist at the ONS, said falling fuel and food prices helped drive the slowdown.
He said: "A fall in motor fuel prices, particularly diesel, helped ease inflation in June."
He added: "Food prices fell this month, driven by products including chocolate, margarine and beef."
Consumers also benefited from seasonal discounts, with Fitzner saying: "Clothing prices also fell with the start of summer sales, with bigger discounts than last year."
He added that businesses were also seeing lower costs.
"The cost of raw materials dipped for the first time since January, mainly due to the lower price of crude oil, while the increase in the costs of goods leaving factories slowed again."
The better-than-expected figures are likely to be welcomed by the Government as it looks to convince voters that the cost-of-living crisis is beginning to ease.
Nathan Emerson, CEO of Propertymark, described the latest inflation figures as an encouraging step in the right direction.
He said: "While it's encouraging to see inflation move closer to the Bank of England's 2% target, household affordability remains under pressure."
Emerson warned there were still risks ahead, adding: "Renewed international political tensions could still impact the wider economy, particularly over the summer months."
However, he noted the significance of today's figures, saying: "Although today's figures mark a third consecutive fall, many households will likely continue to approach their finances with caution as not to overstretch their levels of incomings vs outgoings on key household items moving forward."
How should Andy Burnham tackle the cost of living?
My focus as well as cutting overall costs would be giving young adults hope and ensuring help isn’t focused only on the lowest earners. More in the video. Please post your priorities in the comments pic.twitter.com/9qJQzWleQx— Martin Lewis (@MartinSLewis) July 21, 2026
Kevin Mountford, personal finance expert and co-founder of Raisin UK, also welcomed the latest figures.
He said: "A fall in inflation is welcome, but it does not mean prices are falling or that household budgets will suddenly feel less stretched."
He added: "It simply means prices are rising more slowly, and many people will still be paying considerably more for everyday essentials than they were a few years ago."
'Now is the time to shop around'
Harriet Guevara, Chief Savings Officer at Nottingham Building Society, said households should welcome today's figures but remain prepared for further changes later this year.
She said: "While inflation has fallen to 2.6% this month, relief for households is likely to be short-lived."
She pointed to the recent rise in energy bills, adding: "The drop in fuel prices following a US-Iran ceasefire is likely to be more than offset by the 13% increase in the energy price cap at the start of July, making a rise in inflation next month a distinct possibility."
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Despite that, she said savers still have opportunities: "For anyone with savings in a low-interest account, or an older product they have not reviewed recently, now is the time to shop around."
She also urged savers to make the most of current tax rules.
"It is also worth remembering that this is the last year when anyone under 65 can put up to £20,000 into a Cash ISA tax-free, before the allowance drops next April. So make the most of that tax-free wrapper if you can."
Have you seen food prices going up or down? Tell us in the comments below.
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