Increases from 3.4% in May
UK inflation rose to 3.6% in June, according to data from the Office for National Statistics, up from 3.4% in May.
This figure came in above expectations from economists polled by Reuters, who had forecast the UK Consumer Prices Index (CPI) would remain unchanged from last the previous month.
Month-on-month, alcohol and tobacco saw a significant uptick in cost, rising from 5.4% to 6.4% in the 12 months to June.
Richard Heys, acting chief economist at the ONS, said that the hotter inflation was “driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year”.
Food prices also increased for the third consecutive month, reaching their highest annual rate since February 2024.
Inflation came in just below the peak 3.7% CPI rate expected by the Bank of England this summer and well above the central bank’s 2% target.
Core CPI, which excludes energy, food, alcohol and tobacco, jumped by 0.2 percentage points, from 3.5% in the 12 months to May to 3.7% in the year to June.
Zara Nokes, global market analyst at JP Morgan Asset Management, said today’s (16 July) data “showed no signs of inflation relief in the UK just yet, with underlying price pressures still bubbling away”.
She continued: “Unfortunately for the Bank of England, things will likely get worse before they get better, with inflation expected to push higher in the coming months owing in part to an increase in regulated prices.”
Quilter’s investment strategist, Lindsay James, explained that “it seems we are now seeing the effects of the rise in employer national insurance contributions feeding through into prices, along with increased shipping costs hitting too”.
She added that, despite the trade deal struck with the US, the UK still has major economic challenges to fight.
“While the geopolitical risks have subsided for now, the economic ones continue to blight. The challenge to get inflation back down and staying at 2% is looking increasingly fraught with danger,” said James.
Linus Uhlig (Professional Adviser)