UK inflation rose unexpectedly in June, reaching its highest level since January 2024 and prompting renewed scrutiny of the BoE Bank of England’s interest rate trajectory.
According to the Office for National Statistics (ONS), the Consumer Prices Index (CPI) rose by 3.2% year-over-year, up from 2.9% in May. The increase was driven primarily by higher food and energy prices, as well as a rebound in services inflation.
The surprise uptick complicates expectations that the Bank of England would move forward with interest rate cuts later this summer. Market forecasts had widely anticipated a downward trend in inflation, aligning with the BoE’s 2% target and strengthening the case for monetary easing.
“This data will likely give the BoE pause,” said Sarah Hewson, an economist at HSBC. “While inflation is still expected to moderate over the medium term, persistent price pressures—especially in services—may delay any immediate rate cuts.”
Core inflation, which excludes volatile food and energy prices, also edged up to 3.5%, reinforcing concerns about underlying price persistence.
The central bank’s next policy decision is scheduled for August, with analysts now divided on whether a rate cut will be announced or postponed until later in the year.
The pound strengthened slightly against the dollar following the release, as traders priced in the likelihood of a more cautious stance from the BoE.
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