Cost of living at 2.8%: What the latest inflation rate means for food bills, petrol price and family budgets

The latest cost of living rate has been released today showing that UK inflation held at 2.8% - remaining above the Bank of England’s 2% target.

Petrol prices, vehicle taxes and airfare costs are rising the fastest while food bills are helping to ease the pressure on household budgets, according to the Consumer Prices Index (CPI) in the year to May released in June by the Office for National Statistics (ONS).

What does war in the Middle East mean for inflation?

The outbreak of war in Iran and the Middle East at the end of February has sent oil prices rocketing.

In turn this raises energy prices and generally leads to higher inflation for economies.

The Iran and US are set to sign a peace deal this week which is hoped to bring down oil prices and feed through to lower costs households.

However, even if the conflict ends now, it will take some time to feed through to inflation figures.

As a result, the cost of living is widely expected to edge up over the coming months before coming back down.

Some forecasts put it as high as 4% for 2026.

Chancellor Rachel Reeves today said: “While the war in the Middle East pushes prices up globally, we have got the right economic plan and inflation has held steady.

“We’re protecting families and businesses from rising costs, with cuts in energy bills and freezes in fuel duty and rail fares.

“This is the right economic plan to build a stronger more secure Britain.”

Are food prices still going up?

It was feared that the cost of living would rise further in May, so staying firm at 2.8% offers a small slice of relief four budgeting households.

Better still, meat, dairy and vegetables food all saw price rises slow.

War in the Middle East has pushed up energy costs, which raises the cost of producing food.

When this happens, the cost is usually passed on to consumers and shoppers will feel the pain at the tills.

What is happening to petrol prices?

Transport was one of the biggest factors behind rising inflation in the latest set of UK official figures.

The ONS noted that the average price of petrol rose by 0.6p per litre between April and May 2026, compared with a fall of 2.1p per litre between April and May 2025.

Oil prices have eased back from highs this week thanks to the brokering of a peace deal between the US and Iran.

However, there will be a lag before this feeds through to lower fuel prices at the pump.

The latest petrol price is 15.5p and the latest diesel price is 175.9p, according to the RAC Foundation.

What can you do if your money is not stretching far enough?

If you’re worried about the cost of living on your budget, there are lots of easy moves you can make to get on top of your money.

First, do an audit of your direct debts and subscriptions. Cancel anything you’re not using.  And switch to better deals if you’re out of contract on services such as broadband or mobile.

Food bills are one of the biggest drains on family budgets. Try a reset by swapping branded items to own-brand. Switching to a cheaper supermarket could also help slash your costs – Aldi and Lidl usually come out as cheapest supermarkets in independent comparisons.

Make sure that you’re getting all the help and support you’re entitled to. Running a check for benefits through a calculator such as turn2us can stop your missing out on vital financial payments.