UK inflation unexpectedly rises in June
By Abigail Townsend
Date: Wednesday 16 Jul 2025
(Sharecast News) - UK inflation continued to push higher last month, official figures showed on Thursday, outstripping forecasts.
According to the Office for National Statistics, the consumer prices index rose by 3.6% in the 12 months to June, up from 3.4% in May and the highest since January 2024, when it was 4.0%.
Analysts had largely expected the rate to remain unchanged.
Transport, and motor fuels in particular, was the largest upward contributors, rising to 1.7% from 0.7% a month previously.
Air fares spiked 7.9% between May and June, compared to a rise of just 3.2% a month previously. Fares usually rise in June, as the busy summer season gets underway. However, last month's hike was the highest for seven years.
Food price inflation also increased for the third consecutive month, to 4.5%, its highest annual rate since February 2024, although the ONS noted it remained well below the 2023 peak.
Including owner occupier's housing costs, inflation rose by 4.1%, up from 4.0%.
Core inflation, which strips out the more volatile elements of energy, food, alcohol and tobacco, was 3.7%, up from 3.5% and ahead of consensus, also for 3.5%.
The data is likely to make for difficult reading for the Bank of England, which is struggling with sluggish economic growth alongside persistently sticky inflation.
It has so far cut interest rates twice this year, to 4.25%, but members of the Monetary Policy Committee remain split about the size and pace of the reductions. The BoE has an inflation target of 2%.
Martin Sartorius, principal economist at the CBI, said the stronger-than-expected print would raise concerns that "recent price pressures - driven by higher household energy prices and the passthrough of increased employment costs - could potentially re-trench inflation in the economy.
"While we still expect the MPC to continue gradually cutting rates, the upside inflation surprise means its August decision will be finely balanced."
Matt Swannell, chief economic adviser to the EY Item Club, said: "Headline inflation is expected to edge up over the next few months and peak in September.
"Following this, support from the energy category should fade, putting downward pressure on the headline rate over the remaining months of this year and into 2026. However, the fall in inflation is likely to be gradual, reflecting ongoing stickiness in the services category."
Services CPI, which has long been a concern for the MPC, ticked up to 4.7% in June.
However, looking to next month's MPC meeting, Swannell added: "There doesn't seem to be enough in these inflation numbers to derail a cut in August, and we expect the MPC's established cut-hold tempo to continue at subsequent meetings."
Dan Coatsworth, investment analyst at AJ Bell, said: "There is a real threat of stagflation, as the rate of inflation moves higher and the economy is stuck in the mud.
"As it stands, the market expects an 81.9% chance of a rate cut in August, but there is a lot less confidence in future cuts.
"Plenty of companies are feeling the pressure of extra employment-related costs, and they're reluctant to hire new people when someone leaves; others are already cutting positions. This means the BoE is stuck between a rock and hard place."
Kris Hamer, director of insight at the British Retail Consortium, said: "Despite fierce competition between retailers, the ongoing impact of the last Budget and poor harvests caused by extreme weather have resulted in prices for consumers rising. The price of many staples rose on the previous month, including bread, rise and pasta."
The MPC next meets on 7 August.
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