Inflation falls to 2.6%, offering ‘temporary respite’

CPI rose by 2.6% in the 12 months to June 2026, down from 2.8% the previous month.

On a monthly basis, CPI increased by 0.1% in June 2026, compared with a rise of 0.3% in June 2025.

Meanwhile, the Consumer Prices Index including owner-occupiers’ housing costs (CPIH) rose by 2.8% in the 12 months to June 2026, down from 3% the previous month.

On a monthly basis, CPIH rose by 0.2% in June 2026, compared with a rise of 0.3% in June 2025.

Transport, food and non-alcoholic beverages made the largest downward contributions to the monthly changes in both CPIH and CPI annual rates.

Alex Beavis, interim director of banking at LHV Bank, commented: “This fall in inflation is a surprise, and likely to be a temporary respite, given the forecasts for the rest of the year.

“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, but it’s equally crucial for savers to be active in pursuing the best possible return on the money they set aside.”

Buster Tolfree, managing director of mortgages, BTL and bridging at United Trust Bank, added: “Today’s fall in inflation is encouraging and will offer some reassurance to households after a prolonged period of pressure on living costs.

“However, borrowers should not assume it will lead immediately to lower mortgage rates.

“Mortgage pricing is influenced by several factors, including expectations about where inflation and Bank Rate are heading over the life of a product, as well as movements in wholesale funding markets.

“With energy prices and global conditions remaining uncertain, lenders will continue to assess the outlook carefully.”

Nathan Emerson, CEO at Propertymark, commented: “While it’s encouraging to see inflation move closer to the Bank of England’s 2% target, household affordability remains under pressure.

“Renewed international political tensions could still impact the wider economy, particularly over the summer months.

“Although today’s figures mark a third consecutive fall, many households will likely continue to approach their finances with caution so as not to overstretch their levels of incomings vs outgoings on key household items moving forward.”