UK inflation is expected to have risen again when fresh data for June 2025 is released by the Office for National Statistics (ONS) on Wednesday, July 16.
According to the latest FactSet consensus, the UK’s core consumer prices index (CPI) is forecast to have risen by 3.5% over the 12 months to the end of June—0.1% higher than May’s 3.4% figure for the previous 12-month period.
That will come as more unwelcome news for the Chancellor, Rachel Reeves, herself due to address City grandees with news of significant financial services and savings policy reforms in a speech at Mansion House the night before, on Tuesday, July 15. It will also inform the Bank of England’s next move when its Monetary Policy Committee (MPC)—responsible for setting UK interest rates—next meets on Aug. 6. UK interest rates are still set at 4.25% following a rate hold by the central bank in June.
The development also comes as commentators and analysts monitor the ongoing market and economic fallout from the imposition of tariffs by the US government on its global trading partners. This includes the UK, which received a “sweetened” 10% deal.
New GDP data for May suggests the UK economy underperformed for a second month.
Some are still sanguine about the situation, however.
“Yes, inflation is high in the UK, and a bump year-over-year to 3.5% would put us out of sight of the BoE’s 2% target,” says Morningstar senior analyst Michael Field.
“That said, we were warned last month about the effects of energy price cap rises, and how this is distorting the headline inflation number. This will take a few months to iron out, so investors will need to be patient.
“Saying that ‘it’s just because energy prices are high’ obviously doesn’t put the Chancellor in a good place with the public, however—particularly as some of the rises in prices are being blamed on increases in National Insurance contributions and the minimum wage. A tough few months lie in wait for the current government.”
The Bank of England Predicted UK Inflation Would Rise
The Bank of England has repeatedly warned that UK inflation could rise, after core CPI, which excludes volatile elements like food and energy, briefly hit its 2% target in May last year.
It cited price increases meted out by energy companies and services vendors in April this year, as well as the effect of the government’s own increase to National Insurance employer contributions, which many businesses passed on to consumers via higher prices, for the ongoing battle to get inflation back down towards its 2% target. It said this would inevitably have an impact on interest rates.
“Consumer price inflation is expected to remain broadly at current rates throughout the remainder of the year before falling back towards target next year,” the June MPC meeting notes said.
“Given the outlook, and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate. Monetary policy is not on a pre-set path.”
What Will Markets Do Next?
UK equity markets are unlikely to react particularly positively to Wednesday’s data. If the data comes in higher than expected—something that occurred for May’s data released last month—there will almost certainly be a negative reaction, as investors once more react to the growing sense that the UK economy is struggling under the weight of domestic price increases and geopolitical pressure.
Next week’s inflation data will be closely watched by the UK’s bond investors. The UK’s bond market is already on high alert amid concern over the Chancellor’s plans for UK public spending, due to be announced at the Autumn Budget in October. That bond managers are already putting their head above the parapet to suggest Reeves is unlikely to be able to stick to her self-imposed “fiscal rules” serves as a warning light for investors worried about tax rises.
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