The figure is down from 8.7 per cent in the year to May. On a monthly basis, CPI rose by 0.1 per cent in June 2023, compared with a rise of 0.8 per cent in June 2022.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 7.3 per cent in the 12 months to June 2023, down from 7.9 per cent in May.
Falling prices for fuel led to the largest downward contribution to the monthly change in CPIH and CPI annual rates. There were also notable downward effects from food and non-alcoholic beverages, furniture and household goods, and restaurants and hotels.
The inflation rate peaked at 11.1 per cent in October 2022, with the ONS estimating that this was the highest rate since 1981.
‘Base rate hikes finally having the desired effect’
Alice Haine, personal finance analyst at Bestinvest, said: “A fall in headline CPI inflation to 7.9 per cent in the 12 months to June will deliver some relief to households, with the bigger-than-expected decline offering hope that the long run of tearaway price rises is finally over.
“However, core inflation – which strips out the more volatile items such as food and energy – remained high at 6.9 per cent, though it is down on May’s 7.1 per cent, indicating that the Bank of England’s cycle of interest rate rises is finally having the desired effect – to bring stubbornly high inflation closer to its target of two per cent.”
Danni Hewson, AJ Bell head of financial analysis, said: “Falling prices at the pump which have caused such controversy of late, were one of the biggest contributors to the larger than expected fall in inflation, and whilst food prices are still going up, they’re not going up quite as fast as they were.
“But relief that the numbers finally seem to be going in the right direction will be short-lived for policy makers and politicians who understand that the average household won’t care about cooling inflation, they just want prices to go down, and with one or two exceptions we’re still a fair way away from that.”
Smaller base rate hike now expected
Previously the Bank of England was widely expected to raise the base rate from five per cent to 5.5 per cent in August – but since the inflation rate was published, many experts have revised their predictions to a smaller rise to 5.25 per cent.
Hewson said: “Markets are now pricing in a less strident move in August, with a rate hike of just a quarter percentage point rather than the half point that most had been considering just a few weeks ago. Looking further out the expectation is for rates to top off at 5.75 per cent rather than over six which had been on the cards.”
