The Office for National Statistics reported that consumer price inflation fell sharply from 2.8% in May, beating economists' forecasts.
Energy prices and food costs were the main drivers of the decline, with petrol falling by 8% over the month.
Chancellor James Hartley welcomed the figures but warned that "the work is not done" as mortgage rates remain elevated.
High street retailers reported increased footfall, suggesting consumer confidence may be returning after months of caution.