UK inflation has fallen to its lowest level in more than a year as price rises slowed by more than expected last month.

The rate fell sharply to 7.9% in June, down from 8.7% the previous month, although it remains almost four times higher than the target.

This is the first time in several months that UK inflation has come in below expectations.

Falling fuel prices contributed to the drop, while food prices rose less quickly than in June last year, the Office for National Statistics said.

It was also announced that Sterling dropped sharply in the foreign exchange markets, following this morning’s inflation report.

The pound has lost almost a cent against the US dollar to $1.2940, down from $1.3034 last night.

Martin Lewis Tweeted: "Inflation down more than expected. In May it was 7.9% year on year down from 8.7% (it was expected to drop to 8.2%) Crucially core inflation was 7.1% and was expected to stay there.

"It has dropped to 6.9%. This takes a little pressure off bank of England and hopefully the money markets, there's a chance (no promises) new mortgage fix rates may ease off a touch."

The ONS explains:

  • Average petrol and diesel prices stood at 143.0 and 145.7p per litre respectively in June 2023, compared with 184.0p and 192.4p per litre in June 2022.
  • Petrol prices fell by 1.4p per litre between May and June 2023, compared with a rise of 18.1p per litre between the same two months a year ago
  • Similarly, diesel prices fell by 8.9p per litre this year, compared with a rise of 12.7p per litre a year ago.

Food prices rose in June 2023 but by less than in June 2022, also leading to an easing in inflation.

Today’s inflation report shows that motor fuel prices fell by 22.7% in the year to June 2023, compared with a fall of 13.1% in May.