UK inflation increased to 3.6% in June, after remaining at 3.4% in the 12 months to May, the Office for National Statistics (ONS) has revealed.

The latest figure is the highest inflation rate recorded since January 2024, when consumer prices index (CPI) inflation reached 4%.

Month-on-month, CPI inflation jumped by 0.3% in June, compared to 0.1% in June 2024.

The ONS said that this inflation increase was driven by the transport sector, particularly motor fuels.

Personal finance analyst at Bestinvest, Alice Haine, said that the latest update is "not great news for consumers" and is not the update that Chancellor Rachel Reeves wanted following her Mansion House speech last night.

She added: "Rising inflation is rarely the news consumers want to hear, particularly for those whose finances are still suffering after the cost-of-living crisis and April’s raft of household bill hikes.

"Throw in the extended freeze on income tax thresholds, which results in people losing a higher proportion of their income to tax as their wages increase, and speculation that Reeves may break her pledge not to extend the freeze further, particularly for higher earners, and even the tiniest uptick in inflation can be unsettling."

The latest figures have been released ahead of the upcoming Monetary Policy Committee (MPC) meeting next month, with analysts now speculating on what will happen to the Bank of England base rate on 7 August.

Head of mortgages and protection at Just Mortgages, Ben Allkins, said that the impact of inflation on the MPC’s next decision is the "question on everyone’s lips".

He concluded: "While inflation has risen and further pressures are likely to push inflation higher throughout the year, disappointing GDP figures for a second successive month and a weak labour market are still likely to deliver the rate cut that is widely expected in August.

"It’s long been clear that the MPC faces a difficult tug of war between managing inflation and supporting economic growth. While we cannot deny that inflation is important and clearly still a challenge, current economic conditions have dictated a need to shift that balance and help pull up the nose.

"A cut to interest rates next month will give mortgage lenders fresh ammo to look at prices and hopefully create new opportunities for people to kickstart their purchase plans. Given the significant role that housing plays in delivering economic growth, everyone comes out a winner."

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