The Office for National Statistics (ONS) reports that the UK Consumer Price Index (CPI) increased by 3.6% in the 12 months to June 2025, up from 3.4% in May. This marks the highest annual inflation rate since January 2024.
The rise was larger than most forecasts, renewing concerns over the cost of living and complicating the Bank of England’s plans for interest rate cuts.
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Food and fuel prices drive inflation surge
Transport and food prices were the main contributors to the inflation spike. Motor fuel prices fell less in June 2025 than in the same month last year, which pushed transport inflation higher.
Air fares rose sharply – the most significant June increase since 2018 – and rail fares also added upward pressure.
Meanwhile, food and non‑alcoholic beverages inflation climbed to 4.5%, its highest annual rate since February 2024, driven by rising costs of bread, meat, milk, cheese and eggs.
Housing inflation eases slightly but remains elevated
Costs in housing and household services remain stubbornly high, though with a slight slowdown. Owner occupiers’ housing costs rose by 6.4% annually in June, down from 6.7% in May.
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By GlobalDataOverall, the housing component contributed nearly two percentage points to CPIH inflation, making it the largest single factor in the headline figure.
Core services inflation – which excludes energy, food, alcohol and tobacco – held at around 4.7%, showing persistent price pressure in the domestic economy.
Implications for the bank of England and households
This uptick in inflation comes amid predictions that the peak could reach 3.7% by autumn before gradually easing in 2026.
The Bank of England, which has already cut interest rates four times since August 2024, will review its next decision on August 7; this stronger reading may prompt a more cautious approach.
For households, persistent price rises continue to erode purchasing power, with food, transport and housing costs remaining the chief pressure points in the cost of living.
Background: UK cost‑of‑living context
Britons have been grappling with elevated inflation since late 2021, driven by pandemic recovery, Brexit and energy shocks.
Although the current rate is well below the 11.1% peak of late 2022, it remains above the Bank’s 2% target. Recent increases in bills and taxes, such as employer National Insurance contributions, have further strained household budgets.
Ultimately, the June CPI report underlines that inflation remains elevated, fuelled by food, fuel and housing costs. It highlights the delicate balancing act for policymakers who must weigh the needs of struggling households against the necessity of anchoring price expectations.
