The news follows a stagnant reading in May, when inflation remained at 2.8% after dipping in April.
Month-on-month, June’s CPI saw an increase of 0.1% compared to a 0.3% rise in June 2025.
Core CPI – which excludes energy, food, alcohol and tobacco – was up by 2.6% in the 12 months to June, marking no change from May’s reading.
The CPI including owner-occupiers’ housing costs (CPIH) saw a 2.8% rise in the year to June, which is a decrease from May’s reading of 3%.
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‘Breathing room’ for BoE
The Bank of England Monetary Policy Committee’s (MPC’s) next base rate decision is due on 30 July, and Emma Hollingworth, chief distribution officer at LSL Financial Services, noted that today’s inflation reading gives the bank some leeway in this regard.
She commented: “Today’s shock fall in inflation is a welcome surprise and there’s no doubt that it gives the Bank of England some increased breathing room in terms of interest rates.
“But how long that lasts is anyone’s guess. The renewed trouble in the Middle East has stoked fears of another bout of inflation, particularly if the Strait of Hormuz, a key artery in the global trade network, remains under threat. For borrowers, what happens to that shipping lane could have major ramifications on the cost of borrowing this year.
“The longer the conflict goes on, the more those inflationary pressures will build. Some forecasters already see inflation topping 4% by this time next year, which is a very different conversation to the one we were having a few months ago.”
She continued: “We don’t expect the Monetary Policy Committee (MPC) to move this month. But borrowers hoping for cuts later in the year should temper their expectations. Swap rates have soared since the trouble reignited, which has already led to a round of repricing among lenders.
“A few weeks ago, we thought we finally had some certainty but now it feels as though we are back to square one. It’s at times like this that brokers earn their keep. And this is why it is vital that they are reaching out to anyone with six months or less on their current deal to help them navigate the uncertainty.”
