Not everyone feels it’s a done deal for an August rate cuts at this point.

Peter Stimson of MPowered Mortgages predicts that at least some of the MPC members will vote to hold interest rates at 4.25 per cent in a few weeks.

“The intake of breath at the Bank of England will have been audible. Such a big jump in CPI isn’t just a blow for the Bank’s ratecutting plans, it’s a punch to the solar plexus,” he said.

“Inflation like this can no longer be dismissed as a blip. It’s now a barrier to cutting interest rates.

“The Bank’s Governor has spent weeks hinting that a Base Rate cut in August was all but a done deal.

“But that certainty has evaporated in the face of today’s inflation data.

“Several members of the Bank’s ratesetting Monetary Policy Committee (MPC) had sounded unconvinced that the time is right to cut the Base Rate to give the stagnant economy the boost it needs.

“Britain’s inflationary relapse will crystallise that view, and when the MPC meets in three weeks’ time it’s likely several members will vote to hold off on a rate cut.

“While the weakness of the economy means the Bank will be keen to resume rate cuts in coming months, the likelihood of an August cut has plunged from near certain to barely 50/50.”

Savers with cash in low-interest bank accounts will be contacted and encouraged to consider more lucrative investments, under Rachel Reeves’ plans to boost the economy and raise wealth.

One example offered by the Treasury on how people can benefit showed that a saver investing £2,000, such as in a stocks and shares ISA or general investing account, rather than letting it sit in a low-interest account, could expect that to grow to £12,000 after 20 years.

That was compared to £2,700 if left in a savings account – a difference of more than £9,000 for families or individuals, or around 4.5 times more.

Nick Lawson, portfolio manager at Julius Baer, says the UK is looking wobbly in terms of stagflation now – not just through inflation rates but for where inflation is stemming from, alongside those poor growth figures we’ve seen.

“Wednesday’s CPI print might cause a headache for the Bank of England, and makes the Chancellor’s difficult job that little bit more intolerable,” Mr Lawson said.

“Coming in at 3.6%, ahead of analysts’ forecasts of 3.4%, means traders, mortgage holders and the Treasury will be anxiously awaiting the next Monetary Policy Committee decision.

“Core CPI – which removes the effects of energy, food, alcohol, and tobacco – was even higher, at 3.7%. This will likely mean nervousness in the Bank that today’s figures can’t be chalked up to the more volatile peripheral components of the data.

“Let us not forget the dismal recent performance of the UK economy, with negative growth in both April and May. We’re sure the Bank of England would dearly love to give borrowers and businesses a break by cutting rates, and that Ms Reeves would love to see a modicum of her fiscal headroom restored.

“Instead, as tariff and tax impacts seemingly start to bite, Britain teeters on the edge the nastiest of economic nightmares: stagflation. The Bank has long talked of ‘gradual and careful’ rate cuts. Today, the tightrope they walk got a little higher and a little more perilous.”

In part as a result of this sticky inflation, the Bank of England (BoE)’s Monetary Policy Committee held their vote to maintain interest rates at 4.25 per cent in June, following a cut in May.

Here’s how it all impacts your money, your mortgage and savings:

There will be plenty more discussion going forward over whether the Bank of England (BoE) will cut or not next month – but one analyst is still predicting an August interest rates cut.

Sanjay Raja is Deutsche Bank’s chief UK economist, a prominent voice in the sphere.

He notes the poor data from a BoE perspective, but thinks the Monetary Policy Committee’s (MPC) focus on jobs and growth means we’ll still see a rate cut.

“Perhaps given the focus on the labour market, tomorrow’s data may hold more weight when it comes to shaping the monetary policy outlook,” he said.

“But today’s data won’t give the MPC any sense of comfort on the inflation side. Headline CPI, core CPI, services CPI, and core goods CPI now all sit above Bank staff projections. All of the Bank’s core services measure have also increased in June.

“And we expect headline CPI to push closer to 4% year on year after the summer, before beginning its slow descent back to target later next year. The Bank, like us, will be watching closely the implications on inflation expectations, which already look a bit uncomfortable.

“This kind of data (in and of itself) won’t motivate the MPC to contemplate faster or sequential rate cuts. In fact, the bar for a dovish surprise on tomorrow’s labour market data will likely rise on the back of today’s inflation reading.

“Is an August rate cut in jeopardy? No, we don’t think so. There’s enough of a slowdown in GDP and the labour market to warrant a ‘gradual and careful’ easing of monetary policy. But the onus now rests on the labour market to shape how far and how fast the MPC can cut this year and next.”

A few details now on where food price increases have stemmed from, courtesy of the Food and Drink Federation (FDF):

• Beef and veal rose 20.4%
• Butter (20.0%) also showed a big increase
• Chocolate (16.3%), coffee (12.3%), and lamb and goat (10.2%) were also notable rises
• Prices fell fastest for: olive oil (-9.6%), rice (-3.1%), sugar (-2.6%) and frozen seafood (-1.3%)

Balwinder Dhoot, director of sustainability and growth at the FDF, explained where exactly the food price rises have come from – and where the government can protect against it.

“Food and drink inflation has risen once again in June, continuing a concerning trend in 2025. Food and drink inflation has consistently outpaced the overall rate of inflation throughout the year, and seen sharp increase in the past 12 months – and we expect inflation to rise further this year.

“The pressure on food and drink manufacturers continues to build. With many key ingredients like chocolate, butter, coffee, beef, and lamb, climbing in price – alongside high energy and labour expenses – these rising costs are gradually making their way into the prices shoppers pay at the tills.

“The Government’s new Food Strategy is an opportunity to create a more resilient food system. This should include looking again at the costs and regulations facing food and drink manufacturers in order to address creeping price inflation.”

Earlier this year, when inflation was down to around 2.6 per cent, not too many economists were getting carried away – there was always the expectation of a rise in April and across summer.

However it has been slightly higher than many have predicted in the end, with unexpected factors such as the trade tariff battle, the rising oil price over Iran-Israel and other external issues all impacting, even beyond the UK’s domestic problems.

Suren Thiru, economics cirector at The Institute of Chartered Accountants in England and Wales (ICAEW), believes there will be worse yet ahead too, with a bigger rise in inflation heading into autumn.

“These figures confirm that cost pressures on households and businesses remain disconcertingly high as rising fuel and food prices helped drag inflation further away from the Bank of England’s 2% target.

“June’s uptick is the start of a slight summer surge in inflation with skyrocketing business costs and global trade turbulence likely to lift the headline rate moderately higher by the autumn, despite July’s drop in energy bills.”

The usual question when it comes to inflation is…what now for my money?

Let’s be very clear, the first thing you must do is make sure your savings are protected. By the nature of inflation meaning higher prices, your cash is worth less over time. So with inflation at 3.6 per cent, the interest rate your savings earn need to be at least than that just to stand still.

So once you’ve got that part sorted out for essential savings, it’s time to consider what you do next.

Dean Butler, managing director for retail direct at Standard Life, points out that those with more than a few months’ worth of expenses saved away should be looking to do more with some of that cash – particularly if it’s not expected to be needed over the next few years.

“For borrowers, higher for longer rates mean the prospect of sustained higher costs, particularly for mortgage holders and those with other forms of debt,” he said.

“On the other hand, savers continue to benefit from competitive rates, with some best buy easy-access savings accounts still offering between 4 and 5 per cent.

“It’s worth noting that any cash gains are still likely to be marginal with inflation considered – those willing and able to accept an element of risk could consider investing for a better chance of substantial returns above inflation, perhaps through a tax efficient product like a stocks and shares ISA or, taking a longer-term view, with a pension.”

Let’s look at a few components individually, starting with food and non-alcoholic beverages.

Last month they were rising across 12 months at 4.4 per cent; this time around it’s 4.5 per cent, ONS data shows.

Kris Hamer, director at the British Retail Consortium, said the Budget last year has driven food inflation, as well as poor harvests around the world.

“While inflation has risen steadily over the last year, food inflation has seen a much more pronounced increase. Despite fierce competition between retailers, the ongoing impact of the last budget and poor harvests caused by the extreme weather have resulted in prices for consumers rising,” he explained.

“The price of many staples rose on the previous month, including bread, rice and pasta though consumers in the market for chocolate benefitted from a decrease.

“With rising costs already driving up prices at the till, the chancellor must take action now to protect consumers from inflation rising further. The proposed business rates reform would drive up costs for many high street stores, limiting investment and pushing up prices for everyone. If the Government wants to support households and high streets, they should ensure that no shop pays more as a result of these changes.”

A key question, with the Monetary Policy Committee meeting next month and not having cut interest rates from 4.25 per cent last time around.

Quick basic primer, skip if you know it: Interest rates are one of the tools used for controlling inflation by the Bank of England. Higher rates make businesses less likely to invest in personnel and projects, meaning consumers may have less spending power, making them buy less overall, lowering demand, meaning prices must come down again.

So, with inflation back on an upward tick, it’s one mark against cutting interest rates this time – but there’s more at play.

The employment market is a closely watched metric and there have been signs that businesses are choosing to stop hiring and payrises as a consequence of April’s National Insurance Contributions increase.

That’s a particularly important tick in the box to cut interest rates.

Also economic growth has been almost non-existent in the past three months, which is again a reason to cut rates.

Only yesterday, markets were pricing an 85 per cent chance of a rate cut in August. We’ll see shortly how much that has changed.