UK inflation surges to 3.6% in June

UK inflation rose unexpectedly in June, climbing to 3.6% and marking the steepest monthly increase in over a year, according to the latest figures released by the Office for National Statistics (ONS). The surprise jump has raised concerns among policymakers and added pressure on the Bank of England ahead of its next interest rate decision.

The Consumer Prices Index (CPI), which measures the average change in the prices of goods and services, increased by 3.6% in the 12 months to June 2025. This marks a rise from 3.4% in May and the highest rate since January 2024. Most economists had forecast inflation to remain unchanged at 3.4%, making the latest figure a notable deviation from expectations.

The ONS attributed the increase to rising motor fuel and food prices, with food inflation climbing for the third consecutive month. Transport costs were the single largest contributor to the monthly rise, driven by a spike in fuel prices. In contrast, housing and household services costs, particularly owner occupiers’ housing costs, provided a partially offsetting downward influence.

Inflation broadly rising

The broader Consumer Prices Index including owner occupiers’ housing costs (CPIH) also rose to 4.1% in the year to June, up slightly from 4.0% in May. On a monthly basis, both CPI and CPIH increased by 0.3%, reflecting accelerated price growth compared to the same period last year.

Core inflation figures, which exclude the often-volatile components of energy, food, alcohol, and tobacco, also moved higher. Core CPI increased to 3.7% in the year to June, from 3.5% in May. Similarly, core CPIH rose to 4.3%, up marginally from 4.2% the previous month. Goods inflation, in particular, saw a noticeable jump, with annual rates rising from 2.0% to 2.4%.

Bank of England under pressure

The unexpected rise in inflation comes at a delicate time for the Bank of England, which has been cautiously managing interest rates in an effort to bring inflation back toward its 2% target. The Bank had previously projected that inflation would peak at around 3.7% between July and September before easing. June’s figures now bring that peak closer, and potentially higher, than previously anticipated.

The data is likely to influence the Bank’s Monetary Policy Committee as it prepares for its next meeting in August. A higher-than-expected inflation rate could increase the likelihood of a rate hike, despite concerns about slowing economic growth.

While inflationary pressures remain elevated, economists warn that continued volatility in global food and fuel markets could keep prices stubbornly high in the near term. However, many still expect inflation to ease later in the year, provided commodity prices stabilise and wage growth moderates.