UK inflation came in hotter than expected in June, rising to 3.6% year-over-year, according to data released this week by the Office for National Statistics. The reading surpassed economist forecasts of 3.4% and marked an uptick from May’s 3.4% figure.
Core inflation, which excludes energy, food, alcohol, and tobacco, also rose to 3.7% from 3.5% in May, signaling persistent price pressures across key sectors. The increase was largely driven by slower declines in motor fuel prices and a continued rise in food costs.
The hotter-than-expected data adds complexity to the Bank of England’s decision-making ahead of its August policy meeting. While inflation remains well above the BOE’s 2% target, the UK economy has shown signs of weakness, contracting for a second consecutive month in May.
Despite the inflation surprise, economists still expect the central bank to cut interest rates by 25 basis points in August to support faltering growth. However, the stronger inflation print may limit the BOE’s ability to ease aggressively.
For the British pound, sustained inflation could offer short-term support, especially if rate expectations stay elevated. But if economic data continues to deteriorate, the currency may come under pressure as investors weigh growth risks against tightening policies.
