Comic book fans shop at a Tesco near the MCM Comic Con London 2022 at ExCel on 28 May 2022 in London. (Photo by Hollie Adams/Getty Images) Shop prices were just 0.2% higher in June, down from 0.6% in May, according to the British Retail Consortium. This was in part driven by heavy discounting of general merchandise items, such as TVs, and a continued fall in food price inflation, which dropped from 3.2% in May to 2.5% in June.
After soaring to record highs during the pandemic, food price inflation is now at its lowest level since December 2021, helped by falling prices for key grocery items such as butter and coffee.
Tesco, Britain’s largest grocer, said last month that shoppers were spending more in stores and online as food price inflation eases. CEO Ken Murphy said at the time that there was a “gentle ongoing improvement in customer sentiment” and the grocer’s base case for the rest of the year is very low single-digit inflation.
Prime Minister Rishi Sunak, who is facing a crunch election vote later this week, already declared the worst of the cost-of-living squeeze over last month when UK inflation met the Bank of England’s 2% target for the first time in almost three years.
Read More: UK Inflation Falls to 2% Goal for First Time in Three Years
The latest sign of falling inflation comes as the Bank of England is expected to start easing policy as early as August, with markets pricing in a better than 60% chance of a quarter-point interest rate cut. The market is also pricing in a high chance of one more additional reduction this year.