(Bloomberg) -- Inflation in UK stores has fallen close to zero for the first time since October 2021 in a fresh sign that pressure on household budgets is easing. 

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 Plc, Britain’s largest grocer, said last month that shoppers were spending more in stores and online as food price inflation eases. Chief Executive Officer 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. 

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.

J Sainsbury Plc said Tuesday that lower inflation kept volume growth strong in the grocer’s first quarter. That was despite unseasonal weather last month that normally keeps shoppers away from stores.

(Updates with Sainsbury’s comments in final paragraph. A previous version corrected odds of rate cut next month.)

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