June UK CPI fell below Bank of England forecasts, but surging energy prices may push inflation back above 3% soon.
UK headline inflation dropped to 2.6% year-over-year in June, undershooting the Bank of England’s April forecast by 0.5 percentage points. The decline was broad-based, with food inflation slowing sharply to 1.7%, the lowest in 15 months.
Despite the downside surprise, renewed energy market pressures threaten to reverse the trend. Crude oil prices have risen due to geopolitical tensions, including the collapse of the US-Iran ceasefire and disruptions in the Strait of Hormuz. Ukrainian attacks on Russian refining capacity have further tightened global diesel supplies.
Analysts warn that persistent energy price increases could trigger second-round effects in wages and pricing, keeping inflation elevated. The Bank of England may face prolonged challenges in stabilizing inflation near its 2% target.