British inflation cooled again in June, giving households and policymakers a modest piece of good news. Consumer prices rose 2.6% in the year to June, according to the Office for National Statistics, down from 2.8% in May and edging closer to the Bank of England's 2% target.
What the figures show
The headline measure, the Consumer Prices Index (CPI), rose 2.6% over the 12 months to June, a slowdown of two-tenths of a percentage point from May. A broader measure that includes housing costs, CPIH, rose 2.8%, down from 3.0%.
The disinflation was concentrated in two areas. In the ONS's words, "transport, and food and non-alcoholic beverages made the largest downward contributions to the monthly change in both CPIH and CPI annual rates." Within transport, motor fuels did the work: diesel prices fell 10.7 pence per litre between May and June. Food and non-alcoholic beverage inflation slowed to 1.7%, which the ONS notes is its lowest rate since August 2024.
The core measure held steady
Not everything eased. Core inflation, which strips out volatile items like energy, food, alcohol and tobacco to show the underlying trend, was unchanged: core CPI held at 2.6%, and core CPIH at 2.8%.
That distinction matters. The fall in the headline rate came largely from cheaper fuel and slowing food prices, both of which can move sharply month to month. The fact that core inflation did not fall suggests the underlying pace of price rises in the economy was steadier than the headline number alone implies. For the Bank of England, which watches the core measure closely precisely because it filters out that volatility, a flat core reading is a more cautious signal than the improving headline.
Why it matters
Inflation figures are among the most consequential data any economy produces, because they feed directly into interest-rate decisions, wage negotiations and the real value of people's savings. At 2.6%, UK inflation is now within touching distance of the 2% target the Bank of England is mandated to hit, a long way from the peaks of recent years.
For borrowers, a rate drifting toward target reduces the pressure on the central bank to keep policy tight, though the steady core reading is a reason for caution rather than celebration. We do not predict what the Bank will do next; that is for its rate-setters to decide, and they will weigh the softer headline against the firmer core. For households, the more immediate relief is concrete: fuel is cheaper than it was, and food prices, while still rising, are rising at their slowest in nearly two years.
The bigger picture
A single month's data is a snapshot, not a trend, and inflation readings can bounce around on the very fuel and food prices that drove this one lower. But the direction is encouraging. Headline inflation is easing, the components pulling it down are the everyday costs households feel most, and the rate is approaching the target that anchors the whole framework of UK monetary policy. The note of caution is in the core measure, which is holding firm and is the number professional forecasters will be watching most closely in the months ahead.
