UK inflation rises unexpectedly to 3.6% as Labour faces economic scrutiny
The Office for National Statistics (ONS) said the consumer prices index rose by 3.6% last month, up from a reading of 3.4% in May. City economists had forecast an unchanged reading.
The rise comes as Labour faces intense scrutiny over its economic management after two months of negative growth and with speculation mounting over tax rises.
Reeves sought on Tuesday to shrug off Britain's anaemic growth performance at her Mansion House speech, telling City bankers she would slash red tape to help reboot the economy.
The UK's annual inflation rate has risen this year after dramatic increases in water bills, energy costs and council tax – complicating the Bank of England's approach to cutting interest rates.
However, concerns are growing over the strength of the UK economy amid a slowdown in the jobs market and as Donald Trump's erratic trade war weighs on the global outlook.
Threadneedle Street has cut its base interest rate four times in the past year, most recently in May, to 4.25%. This has eased some of the pressure on mortgage holders after borrowing costs were ramped up in response to inflation reaching a peak of 11.1% in late 2022.
City investors expect at least two further quarter-point cuts this year, with financial markets anticipating the next reduction at the Bank's August policy meeting.
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