UK inflation rose unexpectedly in June, driven by higher fuel and food prices, adding to pressure on the chancellor, Rachel Reeves.
Figures from the Office for National Statistics (ONS) showed the consumer price index rose to 3.6% in June, up from 3.4% in May. City economists had expected no change. The jump comes after two months of negative growth and amid growing concerns about potential tax rises.
Speaking at the Mansion House, Reeves tried to downplay the weak growth figures, promising to cut red tape to boost the economy.
Inflation remains above the Bank of England’s 2% target, with forecasts suggesting it could reach 3.7% by September. Food and drink inflation rose to 4.5% in June – the highest since February – led by rising prices for cakes, meat, milk, eggs and cheese.
Fuel prices also contributed to the rise in the inflation rate. Although petrol and diesel prices are lower than a year ago, the pace of monthly falls has slowed.
Services inflation, closely watched by the Bank as a sign of domestic pressure, stayed at 4.7%, defying predictions of a drop. Air fares saw their sharpest June rise since 2018.
Despite four base rate cuts over the past year, economists have warned that sticky inflation could delay further reductions.
Meanwhile, business leaders continue to raise concerns about Labour’s £25 billion rise in employer national insurance, warning it could lead to job cuts and higher consumer prices.
Official labour market data is due on Thursday.
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