Sunak says 'plan is working' as food and petrol prices drive inflation down to 7.9%

Inflation in the UK has fallen faster than expected from May to June but that does not mean food prices are getting cheaper, as ITV News' Business and Economics Editor Joel Hills reports

Inflation has fallen to its lowest level for 15 months, in a sign that price rises may finally be slowing down.

The Office for National Statistics (ONS) said Consumer Prices Index inflation was 7.9% in June, down from 8.7% in May and its lowest rate since March 2022.

Most economists had expected the rate of inflation to fall to 8.2% in June, which would have been another blow to the prime minister's pledge of halving it by the end of the year.

But speaking on Wednesday, Rishi Sunak said the latest figures "show the plan is working" and people "should have confidence" in the rate's drop.

The ONS said falling fuel prices was the biggest driver behind it, while food price inflation also reduced to 17.3% from 18.7% in May, though still painfully high.

Motor fuels fell by a record 22.7% in June with the average petrol and diesel prices at 143p and 145.7p a litre respectively last month, compared with 184p and 192.4p a litre a year earlier.

'Today's figures show that the plan is working', Prime Minister Rishi Sunak tells ITV News

Speaking to ITV News, Mr Sunak stressed the need for the government not to borrow any more money as part of his plan to bring down the rate of inflation.

"One of the most important things that I have to get right is not borrowing too much. If government's borrow too much money, if we make the wrong decisions, even though they sound easy and nice in the short-term, that will just make inflation worse and make it last for longer.

"I'm not going to do that. That's not the type of prime minister I am. I want to bring inflation down and I will do whatever it takes to do that."

The fall in inflation means while prices are still rising, they are not increasing as rapidly.

It comes after inflation proved stubborn in recent months, failing to come down as sharply as hoped.

June’s figures could see the Bank of England opt for a smaller increase in interest rates at its next meeting in August, after June’s shock hike to 5%, according to experts.

This will raise hopes that rates do not need to climb as high as feared – with financial markets recently forecasting 6.25% by next March.

'I knew things were going to be difficult this year because of inflation', says Rishi Sunak

“Inflation slowed substantially to its lowest annual rate since March 2022, driven by price drops for motor fuels. Meanwhile, core inflation also fell back after hitting a 30-year high in May," said Grant Fitzner, Office for National Statistics (ONS) chief economist.

He added: “Food price inflation eased slightly this month, although it remains at very high levels.

“Although costs facing manufacturers remain elevated, especially for construction materials and food items, the pace of growth has fallen across the last year, with the overall cost of raw materials falling for the first time since late 2020.”

But CPI is still a long way from the government’s target to halve inflation to 5.3% by the year end.

Chancellor Jeremy Hunt said: “Inflation is falling and stands at its lowest level since last March; but we aren’t complacent and know that high prices are still a huge worry for families and businesses.

“The best and only way we can ease this pressure and get our economy growing again is by sticking to the plan to halve inflation this year.”

"We can win the fight against inflation," says Chancellor Jeremy Hunt

Food inflation fell from 18.3% in May to 17.3% in June, but the retail industry warned supply chains remained volatile and Vladimir Putin’s decision to pull out of the Ukraine grain supply agreement could push up prices.

Helen Dickinson, chief executive of the British Retail Consortium, said: “Efforts by retailers to curb price rises and reduce inflation appear to be paying off as inflation rates for food fell for the third month in a row.

“Prices for cheese, fruit and fish all dropped as lower commodity costs and cheaper energy prices filtered through to customers.

“There were also drops for many non-food items such as children’s clothing, household textiles and domestic appliances, boosted by an increase in summer discounting.

“However, supply chains remain volatile: Russia’s decision to pull out of the Black Sea grain initiative could increase costs for some staples in the future.”

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...