Squeeze on families eases as falling petrol prices push cost of living back
THE cost of living in Britain fell from three-year highs amid tumbling petrol prices, official data showed today.
Falling petrol prices helped push back inflation
Inflation in June eased to 2.6 per cent, from 2.9 per cent in May, as measured by the Consumer Prices Index (CPI).
The fall was largely thanks to lower costs of fuel, as well as some recreational and cultural goods, according to the Office for National Statistics (ONS).
Petrol prices dropped by 1.1p over the period to 115.3p per litre, while diesel also fell by 1.4p to 117.3p.
The dip in inflation means the Bank of England is less likely to raise interest rates in August.
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However, price rises remain well above the policymakers' official target of two per cent.
And average wage increases of only 1.8 per cent means households are still in effect seeing their income eroded by inflation.
Ben Brettell, senior economist at Hargreaves Lansdown, said: "UK inflation fell unexpectedly in June to 2.6 per cent, easing the pressure on squeezed household budgets and substantially reducing the likelihood of an August interest rate rise.
"Falling inflation alleviates the squeeze on household finances – though pay is still shrinking in real terms for now.
"Last week’s labour market update from the ONS showed wages growing by less than inflation for a third consecutive month.
"If inflation continues to moderate, this could bode well for economic growth – the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into lower retail sales.
"If this fails to materialise the economy could see a stronger second half to the year."