Inflation has risen further than expected in June 2025, driven by food and fuel prices, with the consumer prices index (CPI) increasing to 3.6% over the year, compared with 3.4% in the 12 months to May, still significantly higher than the Bank of England’s target of 2%.
Inflation and pay
Pay awards remain ‘cautious’ in uncertain economy
CPI including owner-occupiers’ housing costs (CPIH) rose by 4.1% in the 12 months to June 2025, up from 4.0% in the year to May.
Meanwhile, the retail prices index (RPI), the inflation measure favoured by trade unions in pay negotiations, reached 4.4%, up from 4.3% in May, according to the Office for National Statistics.
Economists had widely expected CPI inflation to stay at 3.4% or rise slightly to 3.5%. Rachel Reeves, the chancellor, said she knows working people are “still struggling with the cost of living” and admitted there was “more to do”.
Figures for all three inflation measures in the 12 months to April overtook the median pay award recorded by Brightmine. Its next set of pay data is published next week, but has stood at 3.0% since December.
Ben Harrison, director of the Work Foundation at Lancaster University, said: “Inflation has increased to 3.6% on the year and rising food prices will be particularly bad news for low-income workers. Our recent analysis reveals one in six workers (17%) are struggling to pay their bills each month and, despite a period of sustained pay increases, only half of workers (48%) believe wage increases are keeping up with the cost of living.
“These trends appear to be pushing a record number of people into taking on second jobs – often with precarious pay and uncertain hours – to try to make ends meet.
“After a year in office, it’s vital that the government doubles down on the factors driving many day-to-day expenses to remain so high – such as a broken housing market, water and energy provision and childcare.”
Martin Sartorius, principal economist for the CBI, said: “June’s stronger-than-expected inflation print will raise concerns that recent price pressures – driven by higher household energy prices and the passthrough of increased employment costs – could potentially re-entrench inflation in the economy.”
TUC general secretary Paul Nowak said: “Households are still feeling the pain of higher prices. High rents, energy, petrol and water bills mean many workers are struggling to keep their heads above water.
“The global uncertainty impacting the economy is showing no signs of settling down. But workers should not be bearing so much of the brunt. It’s time the Bank of England stepped in to deliver a 0.5% cut to interest rates. This will ease pressure on households, put more money into people’s pockets, and help families get back on their feet.”
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