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"Inflation rising to 3.6% is a hammer blow for households and a warning shot for the economy"

ended 16. July 2025

INFLATION rose by 3.6% in the 12 months to June 2025, up from 3.4% in the 12 months to May, according to official data published this morning. On a monthly basis, the Consumer Prices Index (CPI) rose by 0.3% in June 2025, compared with a rise of 0.1% in June 2024.

Experts said the data was a “hammer blow for households” and could see both borrowers and savers lose out, with one adding “we are heading for stagflation without a backdrop for growth”.

Transport, particularly motor fuels, made the largest upward contribution to the monthly change in inflation; housing and household services, particularly owner occupiers' housing costs, made a large, partially offsetting, downward contribution in CPIH.

Additionally, core CPI (CPI excluding energy, food, alcohol, and tobacco) rose by 3.7% in the 12 months to June 2025, up from 3.5% in the 12 months to May.

Ranald Mitchell, Director at Charwin Mortgages, said “iInflation rising to 3.6% is a hammer blow for households and a warning shot for the economy. It shatters hopes of imminent rate cuts, leaves mortgage borrowers exposed, and offers little relief to savers still losing out in real terms. Once again, the Bank of England is left carrying the weight while the Government offers no plan, no leadership and no accountability. Without urgent action, this will only get worse.”

David Belle, Founder at Fink Money, added: “Inflation is up and the spirit of businesses and consumers in this country is down. We are heading for stagflation without a backdrop for growth. The Bank of England is in for a tricky time now. Try to cut and stimulate growth and shift inflation higher or raise rates and batter the economy even more to contain inflation. What's certain is that the government is totally out of its depth and running the economy into the ground."

Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, said “the cost of living crisis continues to bite. The rise in motor fuels was expected given the war in the Middle East and it shows how vulnerable our island is to events all over the globe. Most people can't avoid these price rises, so they ask for higher wages, which can in turn drive up prices, creating a viscious cycle.”

Harry Mills, Director at Oku Markets, said "markets won't like this and we could face another bond market tantrum". He added: “This acceleration in inflation could mean the Bank of England holds rates higher for longer.”

Philly Ponniah, Chartered Wealth Manager at Philly Financial, echoed Belle, saying the Bank of England now has a tough decision on its hands “Today’s inflation figures show a modest uptick, driven largely by rising fuel prices. What’s more telling is the persistence in core inflation, especially in services, which could point to continued pressure from wages and domestic demand. While housing costs helped offset some of the rise, we’re still seeing signs that inflation isn’t cooling as quickly as hoped. This may complicate the Bank of England’s decision-making on interest rates in the months ahead.”

Ken James, Director at Contractor Mortgage Services, warned savers and borrowers could lose out: “Another day, another negative headline for Labour with UK inflation up to 3.6% in June 2025, up from 3.4% in May, driven largely by higher fuel costs. While housing costs helped offset the rise, the data could possibly give pause for thought to the Monetary Policy Committee over the widely expected base rate cut in August.

"Savers continue to lose out in real terms unless returns beat inflation. If this data impacts swap rate movements then borrowers, especially those on variable or tracker mortgages, could face higher payments for longer. Markets may push the pound higher, but uncertainty around government policy and inflation control remains a concern.”

Ben Perks, Managing Director at Orchard Financial Advisers, commented: “Last week a cut was nailed on, now a 0.2% increase in inflation looks set to curb the enthusiasm for it. Utter madness. Honestly, a 0.2% swing changes nothing for borrowers and the Monetary Policy Committee should be looking less at the data and more at the plight of hardworking people.”

Riz Malik, Director at R3 Wealth, said "this isn’t the what Rachel Reeves wanted to wake up and see, especially after last night’s Mansion House speech. We are still a long way from the 2% target and the distance is widening. Hopefully, the Bank of England don’t place too much weight on this when they meet next month.”

16 responses from the Newspage community

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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Inflation rising to 3.6% is a hammer blow for households and a warning shot for the economy. It shatters hopes of imminent rate cuts, leaves mortgage borrowers exposed, and offers little relief to savers still losing out in real terms. Once again, the Bank of England is left carrying the weight while the Government offers no plan, no leadership, and no accountability. Without urgent action, this will only get worse.
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Ken James
Director at Contractor Mortgage Services
Another day, another negative headline for Labour with UK inflation up to 3.6% in June 2025, up from 3.4% in May, driven largely by higher fuel costs. While housing costs helped offset the rise, the data could possibly give pause for thought to the Monetary Policy Committee over the widely expected base rate cut in August. Savers continue to lose out in real terms unless returns beat inflation. If this data impacts swap rate movements then borrowers, especially those on variable or tracker mortgages, could face higher payments for longer. Markets may push the pound higher, but uncertainty around government policy and inflation control remains a concern.
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Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
Today’s inflation figures show a modest uptick, driven largely by rising fuel prices. What’s more telling is the persistence in core inflation, especially in services, which could point to continued pressure from wages and domestic demand. While housing costs helped offset some of the rise, we’re still seeing signs that inflation isn’t cooling as quickly as hoped. This may complicate the Bank of England’s decision-making on interest rates in the months ahead.
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David Belle
Founder and Trader at Fink Money
Inflation is up and the spirit of businesses and consumers in this country is down. We are heading for stagflation without a backdrop for growth. The Bank of England is in for a tricky time now. Try to cut and stimulate growth and shift inflation higher or raise rates and batter the economy even more to contain inflation. What's certain is that the government is totally out of its depth and running the economy into the ground. We seem to be handing out billions for the stupidest reason while British taxpayers are getting battered. I give up.
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Harry Mills
Director at Oku Markets
The UK inflation rate accelerated to 3.6% in June, up from May's 3.4% and far above the Bank of England's 2% target. This was the hottest inflation print since January 2024 as transport, clothing, and food all provided upward contributions. This acceleration in inflation could mean the Bank of England holds rates higher for longer, which should be supportive of the pound. However, this is a double-edged sword: stagflation. An environment of anaemic or negative growth coupled with rising prices is painful enough, but with the Chancellor's frivolous spending habit and her barmy self-imposed fiscal restrictions – meaning, she is forcing herself to constantly rebalance the budget based on long-term forecasts – this creates an even less favourable economic and fiscal backdrop. The Chancellor is backed into a corner, with growth underperforming, a Budget she can't expand, and a manifesto pledge not to raise taxes. Markets won't like this, and we could face another bond market tantrum.
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Riz Malik
Independent Financial Adviser at R3 Wealth
This isn’t the what Rachel wanted to wake up and see, especially after last night’s Mansion House speech. We are still a long way from the 2% target and the distance is widening. Hopefully, the Bank of England don’t place too much weight on this when they meet next month.
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Justin Moy
Managing Director at EHF Mortgages
This increase was broadly expected by the markets so shouldn’t have too much impact on mortgage rates, which have been improving over the last few weeks. The expectation is for more increases before we see inflation settle nearer the 2% target, though a rollercoaster ride over the coming months likely.
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Ben Perks
Managing Director at Orchard Financial Advisers
Last week a cut was nailed on, now a 0.2% increase inflation looks set to curb the enthusiasm for it. Utter madness. Honestly, a 0.2% swing changes nothing for borrowers and the Monetary Policy Committee should be looking less at the data and more at the plight of hardworking people.
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Scott Gallacher
Director at Rowley Turton
Rachel Reeves talks about restoring stability and transforming the economy, but rising inflation and zero growth tell a different story. Inflation creeping back up to 3.6% and two consecutive months of GDP decline suggest the UK is still going backwards rather than standing on solid footing. Higher core inflation is particularly worrying, as it points to persistent underlying pressures rather than short-term blips. It’s hard to square claims of economic renewal with the reality that working people are still being squeezed. Right now, it feels like we’re sliding backwards. Some of her announcements last night in the Mansion House speech are welcome, but a year in, is it a year wasted?
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Michelle Lawson
Director at Lawson Financial
I don’t think there are any shocks here. It’s disappointing that Labour are just continuing to railroad through while destroying most things in their path. I see very little hope and positivity for the economy and we are sinking fast.
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Tony Redondo
Founder at Cosmos Currency Exchange
Global uncertainties, like US tariffs and energy prices, are convenient scapegoats, but domestic fiscal policy deserves closer scrutiny for its role in sustaining inflationary pressures. However, the NICs hike and minimum wage increase directly pressure firms to raise prices or cut costs, contributing to inflation more than official reports may suggest. The Bank’s cautious approach to rate cuts may prioritize financial stability over immediate relief for borrowers, potentially exacerbating affordability issues for households. Meanwhile, savers are consistently disadvantaged in real terms, as savings rates lag inflation, a trend the Bank seems unlikely to address aggressively.
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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
The cost of living crisis continues to bite. The rise in motor fuels was expected given the war in the middle east and it shows how vulnerable our island is to events all over the globe. Most people can't avoid these price rises, so they ask for higher wages, which can in turn drive up prices, creating a viscious cycle.
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Craig Fish
Director at Lodestone Mortgages
This really is a big blow for for peoples pockets, although the public seem to be tghe only ones who knew times were tough. If you believed every word the government spoke you'd think that the UK economy was booming and its all thanks to them. Something has to change because this government are singlehandedly destroying the UK and they have no clue how to rectify the situation. I wouldnt want to be on the MPC commiottee right now because they are really being pushed into a maze with no obvious exit strategy.
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Jack Tutton
Director at SJ Mortgages
Inflation rising by 3.6% in the 12 months to June is likely to put the brakes on the potential base rate cut next month. The rumours of a cut next month month or even a more significant cut in the base rate have been swirling in recent weeks, these latest figures will dampen these reports or could even put a stop to it completely. This will be very disappointing to mortgage holders, there has been so much positivity in the market with all the interest rate reductions we’ve seen and this is likely to halt them in the short term.
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Andrew Montlake
CEO at Coreco
This latest rise in inflation makes the Bank of England's tightrope walk between curbing inflation and promoting growth that little bit harder, and the question now is which of these becomes the more important quest. The shadow of Stagflation now looms large, and government and policy makers will be keen to avoid this settling in for the long term. I suspect this has not done enough to knock the Bank from another two rate cuts this year, but their is a red warning light flashing in the dashboard.
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Debbie Porter
Managing Director at Destination Digital Marketing
June’s inflation uptick to 3.6% is a red flag for both savers and borrowers. Savers are still losing spending power in real terms, especially with many savings rates lagging behind inflation. For borrowers, persistent inflation raises the risk that the Bank of England may delay rate cuts or even consider further tightening, keeping mortgage rates higher for longer. The Government can't ignore its own impact - they’ve made many decisions that raises costs for businesses which will be passed onto the consumer - clearly inflation is proving a stickier problem to resolve than hoped.