UK Inflation Surges to 3.6%, Its Highest Level Since Early 2024

UK inflation unexpectedly rose to 3.6% in June, the highest since January 2024, driven by higher prices in food, clothing, and transportation.

This is up from 3.4% in May, and above economist forecasts which expected it to remain unchanged.

Transport costs were the biggest contributor — with airfares, particularly long-haul and European routes, and rail tickets both rising. Fuel prices dropped compared to last year, but by less than expected, reducing the downward pressure on inflation.Food inflation rose again, hitting 4.5%, the highest rate since February 2024 — driven by rising costs in meat, dairy, coffee, and chocolate.

“Inflation ticked up in June driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year,” Richard Heys, acting chief economist at ONS, commented on the data. “Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year. However, it remains well below the peak seen in early 2023.”

Shoppers continue to feel the pressure as rents are up 6.7% year-over-year. Consumers report noticeable price increases on coffee, beer, and supermarket meal deals.

“Groceries add up massively… Meal deals in supermarkets have gone up massively – they’ve increased by 50p since I can remember,” a person in a street interview with BBC.

Despite average wages rising by 5.2%, low-income households remain especially affected as daily essentials eat into their budgets.

The surprise jump complicates the Bank of England’s path forward on interest rates.  Although a rate cut is expected in August, the higher inflation may prompt more caution. Core inflation (excluding food and energy) rose to 3.7%, and services inflation remained elevated at 4.7%. The UK economy has contracted for two straight months, fueling concern about stagnation alongside persistent inflation.

Chancellor Rachel Reeves acknowledged cost-of-living pressures:

“I know working people are still struggling with the cost of living. That is why we have already taken action by increasing the national minimum wage for 3 million workers, rolling out free breakfast clubs in every primary school and extending the £3 bus fare cap,” she said.

Critics, including Conservative MPs and business leaders, argue that recent tax hikes are worsening inflation and stifling growth.

Mel Stride, the shadow chancellor, said Labour’s tax decisions were adding to pressure on households:

“This morning’s news that inflation remains well above the 2% target is deeply worrying for families.”

The British pound rose slightly after the inflation report. Savers face challenges, as inflation is outpacing average returns on savings accounts. Experts urge people to shop around for better interest rates.

The Bank of England is likely to weigh the weaker economic growth against the stubborn inflation when it meets in August. Policymakers may proceed with a small rate cut, but future reductions could be delayed if inflation persists. Tomorrow’s labour market data will be a key indicator influencing the Bank’s next move.

PwC economist, Adam Deasy commented on the situation:

“While price growth remains far above target, the UK economy contracting for a second straight month in May means the Bank is likely to look through the volatility in this inflation reading and proceed with a rate cut in August… Tomorrow’s payroll data release, the last major data release before the next MPC meeting, may spark the Bank into action to support an economy that increasingly looks like it needs a lift.”

With input from CNBC, BBC, Politico, and the Guardian.