Latest Office for National Statistics (ONS) data has shown that inflation has increased to 3.6 per cent in the year to June, up from 3.4 per cent in May.
The figures exceeded analysts’ predictions that inflation would remain at May’s level. The rise was driven by motor fuel and food costs, with food price inflation increasing for the third month in a row
Core Inflation came in at 3.7% in the 12 months to June, up from the 3.5% in May and lower than forecast. Services Inflation came in at 4.7% unchanged from May
Commenting on inflation figures for June, ONS Acting Chief Economist Richard Heys said “Inflation ticked up in June, driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year.
“Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year. However, it remains well below the peak seen in early 2023.”
Anna Leach, Chief Economist at the Institute of Directors, said “A surprise uptick in inflation in June has pushed CPI to 3.6%, the highest level since January 2024. The increase was driven in large part by rising transport costs, with air fares seeing their fastest annual rise since 2018 and petrol and diesel prices falling more slowly than they did in May. But inflation also picked up across a range of categories — including food, where prices are still rising at 4.5% year-on-year. More concerning for the Bank of England was the rise in services inflation, which edged up from 4.6% to 4.7%. This is the Bank’s preferred measure of underlying inflationary pressure and had been expected to hold steady. Its unexpected strength makes an interest rate cut in August far less of a certainty.
“For households and businesses under strain from high borrowing costs and persistent price pressures, today’s figures will be a disappointment. With inflation still proving sticky and economic growth stagnating, the UK is skirting the edges of stagflation. Attention now turns to tomorrow’s labour market data, which will be crucial for the Bank’s decision-making. The MPC will want clear signs that wage growth is moderating, and second-round inflationary effects are fading, before it can cut rates with confidence.”
James Burgess, Head of Commercial and Insolvency expert at Atradius UK, said “An uptick in inflation will no doubt reignite concerns about further monetary tightening, especially as businesses continue to feel the pressure from prolonged high interest rates and subdued demand. Rising costs for raw materials, wages, and energy are squeezing margins, particularly for SMEs operating on tight budgets.
“In such an uncertain environment, businesses must act decisively to mitigate financial risk. Strengthening cash flow, enhancing supply chain visibility, and leveraging trade credit insurance are key strategies to build resilience and maintain trading confidence.”
Ben Allkins, Head of Mortgages and Protection at Just Mortgages, said “The question on everyone’s lips is what impact this jump in inflation will have on the MPC meeting next month. While it has risen and further pressures are likely to push inflation higher throughout the year, disappointing GDP figures for a second successive month and a weak labour market are still likely to deliver the rate cut that is widely expected in August.
“It’s long been clear that the MPC faces a difficult tug of war between managing inflation and supporting economic growth. While we cannot deny that inflation is important and clearly still a challenge, current economic conditions have dictated a need to shift that balance and help pull up the nose. A cut to interest rates next month will give mortgage lenders fresh ammo to look at prices and hopefully create new opportunities for people to kickstart their purchase plans. Given the significant role that housing plays in delivering economic growth, everyone comes out a winner.”
Paul Noble, CEO of Chetwood Bank, said “Further bad news for the Chancellor following the surprise shrinking of the economy last month. The best-laid plans of Number 11 still aren’t bearing fruit, and while I was relieved to see the U-turn on cutting the cash ISA tax free allowance, it’s not likely last night’s Mansion House speech will have lifted the public’s spirits.
“While there is no clear path to fix our predicament, the prospect of further pinching and hiking from the chancellor is making people up and down the country wince. The cost of living continues to spiral, and nothing that is being done seems to make a difference.
“With Andrew Bailey suggesting bigger cuts might be coming if the job market continues to suffer, Britons will have to rely on themselves to protect the value of their savings from this latest jump in inflation. Make sure every penny you have is working as hard as possible to improve your financial wellbeing, not gathering dust in your current account.”
Simon Webb, Managing Director of capital markets and finance at LiveMore, said “While today’s rise in inflation may delay hopes of an imminent rate cut, it’s important to remember that progress towards economic stability is rarely linear. Setbacks like this are part of the journey, and the broader trajectory still points to easing price pressures over time.
“For the mortgage market, particularly later life lending, the focus remains on helping borrowers plan with confidence. Many over-50s are navigating financial decisions that span decades, not just months and short-term volatility doesn’t change the long-term need for accessible, flexible borrowing options.
“This moment offers a chance to keep conversations going around how we support financial resilience in later life, ensuring that older borrowers aren’t left behind as the market evolves.”