UK Inflation Climbs Unexpectedly To 36% In June 2025 Official Data Shows

Inflation in the United Kingdom has unexpectedly risen to 3.6 per cent, marking its highest level in over a year, according to figures released by the Office for National Statistics (ONS). The annual inflation rate for June increased sharply from 3.4 per cent in May, defying market expectations and the Bank of England’s forecast that it would remain unchanged.

This rise in inflation comes as the UK economy struggles under the weight of contracting growth and rising public sector costs. The economy contracted by 0.3 per cent in April and a further 0.1 per cent in May, adding to growing concerns about economic stagnation. An increase in employment taxes worth £25 billion, introduced earlier this year, and a sharp rise in the minimum wage have been pinpointed as contributing factors to the inflationary pressures.

Grocery prices were a key driver of the inflation uptick last month. Food price inflation accelerated to 4.5 per cent, up from 4.4 per cent in May, reaching its highest rate since February 2024. Motor fuel prices were another significant contributor, falling only slightly compared with a much more significant decline this time last year. Regulated household bills, including water and energy, also exerted upward pressure on inflation, as did higher clothing costs.

Rachel Reeves, the Chancellor of the Exchequer, acknowledged the impact the rising cost of living is having on households. She admitted that more needs to be done to assist struggling families and hinted that further measures may be announced in the upcoming autumn budget.

Core inflation, which excludes volatile categories such as food and energy, rose from 3.5 per cent in May to 3.7 per cent in June. Services inflation, meanwhile, remained unchanged at 4.7 per cent. These measures are closely watched by the Bank of England as indicators of underlying price pressures in the economy and will likely influence its monetary policy decisions in the coming months.

The unexpected inflation rise has led to speculation that the Bank of England may delay a previously anticipated interest rate cut. Borrowing costs had already been reduced from a peak of 5.25 per cent to 4.25 per cent, but this latest development may prompt policymakers to reconsider further reductions at their next meeting in August.

Analysts have observed that businesses may be passing on the increased costs of national insurance contributions and wage rises to consumers through higher prices. Ruth Gregory, Deputy Chief UK Economist at Capital Economics, and Yael Selfin, Chief Economist at KPMG UK, both emphasised that inflationary pressures remain persistent.

The pound strengthened against the dollar as the figures were released, trading at $1.34, while remaining broadly stable against the euro at €1.15. The ONS is set to release additional employment data later this week, which could further influence market sentiment and government policy.