UK inflation fell to 2.6% in June, more than economists had expected, providing a welcome boost for new Prime Minister Andy Burnham as he seeks to ease the cost of living. The drop follows Burnham's pledges to reduce household costs and improve the economy, including a winter VAT holiday on electricity bills and a lower national cap on bus fares, and gives his government a more stable footing as it sets out its early policy agenda.

The consumer prices index reading beat forecasts of a fall from 2.8% in May to 2.7%, driven by cheaper fuel, particularly diesel, following an unstable truce in the Middle East. The Office for National Statistics said food and clothing prices also fell, alongside transport costs, with chancellor John Healey announcing a £2 cap on bus fares from January alongside the electricity VAT cut. Inflation remains above the Bank of England's 2% target, though well below the IMF's April forecast of it approaching 4% by year-end, and the fall may ease pressure on the central bank to raise interest rates from 3.75%, even as renewed Middle East tensions threaten to push oil prices back up.