CPI inflation falls to 2.6%

CPI inflation falls to 2.6%

22 Jul 2026

Today’s inflation data shows year on year CPI price inflation in the UK fell from 2.8% in May to 2.6% in June, in line with market consensus.

Josh Pilley, Head of Multi-Asset Research at XPS Group, commented: “June’s inflation data reflects competing global and domestic dynamics. Lower energy prices and April’s reduction in Ofgem's energy price cap have helped ease inflation, but this is likely to prove temporary following the 13.5% cap increase. Combined with elevated global energy, food and shipping costs, inflationary pressures are expected to build over the second half of this year.  

Investors are also watching the new government's early policy decisions for any signs of fiscal easing that could push inflation and gilt yields higher. While the market has taken recent political developments in its stride, the UK's underlying fiscal challenges remain, and even measures such as the VAT cut on energy bills could increase pressure on gilt markets if they add to government borrowing.

Despite these inflationary risks, the backdrop has remained favourable for DB pension schemes, supported by higher nominal gilt yields and positive investment returns. Our analysis shows aggregate funding remains comfortably above a £200 billion surplus, as of 20 July 2026. Trustees and sponsors should nevertheless continue to monitor their schemes' exposure to inflation and interest rate risks, ensuring hedging strategies remain resilient in a potentially more volatile market environment."