London street (AA)
Britain’s annual inflation rate fell more than expected in June, driven by lower fuel prices, official data showed on July 22, in a boost to new Prime Minister Andy Burnham’s cost-of-living push.
The Consumer Prices Index rose by 2.6 percent in the 12 months to June, down from 2.8 percent in May, the Office for National Statistics said in a statement.
Analysts’ consensus forecast had been for a slowdown to 2.7 percent last month.
Much of the fall was a result of petrol and diesel prices easing as crude prices tumbled in the wake of a ceasefire between the United States and Iran.
However, analysts expect the inflation dip to be short-lived as fresh fighting in the Middle East this month led to the collapse of a preliminary peace deal, pushing oil prices back up.
Burnham, who became prime minister on July 20, has pledged to ease cost-of-living pressures, unveiling a tax cut on household electricity prices and a 2-pound ($2.7) cap on single bus fares in his first days in the job.
“Falling inflation is news families want to hear but there is much more to do to give people the breathing space they need,” said newly-appointed Finance Minister John Healey.
Burnham announced that value-added tax (VAT) would be taken off electricity bills from October in a policy costing the Labour government about 850 million pounds in the current U.K. financial year.
The measure’s start date coincides with an expected rise in the U.K. energy regulator’s price cap on electricity and gas bills, a consequence of the ongoing U.S.-Iran war that will likely spur inflation.
“Higher inflation is still coming,” said Paul Dales, chief U.K. economist at Capital Economics.
“The lagged effect from high energy prices will probably lift inflation above 3 percent in September and to about 3.5 percent early next year,” he said.
