IoD press release Inflation surprise clouds interest rate decision
Commenting on today’s data from the Office for National Statistics that showed the annual rate of CPI inflation rising to 3.6% in June 2025, up from 3.4% in May, Anna Leach, Chief Economist at the Institute of Directors, said:
“A surprise uptick in inflation in June has pushed CPI to 3.6%, the highest level since January 2024. The increase was driven in large part by rising transport costs, with air fares seeing their fastest June rise since 2018 and petrol and diesel prices falling more slowly this year than last year. But inflation also picked up across a range of categories — including food, where prices are still rising at 4.5% year-on-year. More concerning for the Bank of England was the strength in services inflation, which held at 4.7% against expectations for a small decline. Its unexpected strength makes an interest rate cut in August less of a certainty.
“For households and businesses under strain from high borrowing costs and persistent price pressures, today’s figures will be a disappointment. With inflation still proving sticky and economic growth stagnating, the UK is skirting the edges of stagflation. The MPC will want clear signs that wage growth is moderating, and second-round inflationary effects are fading before it can cut rates with confidence.”
