UK June Inflation Forecast at 2.4% as Diesel Prices Fall but July Energy Bills Rise

Official figures on June’s Consumer Prices Index inflation will be published on Wednesday during the week Andy Burnham takes over as prime minister. The Independent reported that some economists forecast the rate at 2.4 percent, down from 2.6 percent in May. The RAC said the average price of a litre of diesel at UK forecourts dropped by more than 16p from the start to the end of June.

That decline marked the largest since records began in 2000 and followed an interim ceasefire deal between the US and Iran that pushed oil prices below pre-crisis levels. Economists also expect inflation in the services sector to have slowed last month, though household energy costs are viewed as providing only temporary relief.

Ofgem’s new price cap took effect at the beginning of July and stood 13 percent higher than previous rates, lifting the typical annual gas and electricity bill by £221 to £1,862.

Tensions in the Middle East flared again in July and Brent crude prices rose. Sanjay Raja, chief UK economist for Deutsche Bank, said the energy disinflation path remains uncertain and the spectre of food price rises remains stark. Victoria Scholar, head of investment for Interactive Investor, said inflation is likely to peak at around 3.5 percent later this year, still above the 2 percent target but under control compared with the October 2022 spike.

Investec analysts forecast a drop to 2.6 percent for June, partly because of lower petrol prices between May and June. The new chancellor’s choice will shape longer-term inflation pressures, analysts noted, as any sign of higher public spending could add to price growth.