UK inflation hits 3.6% peak in June 2025: BoE rate cuts challenged

UK inflation rises to 3.6% in June 2025

The UK Consumer Price Index (CPI) for June 2025 came in at 3.6% year-on-year, rising from 3.4% in May and surpassing analyst expectations. Core CPI also increased to 3.7%, driven by strong services inflation and a jump in goods prices to 2.4%—their highest level since October 2023.

The data raises concerns that the UK’s disinflationary trend may be stalling. On a monthly basis, CPI increased 0.3%, reflecting broad-based price pressures.

Implication for BoE policy: The data complicates the Bank of England’s expected rate cut in August. While markets still price in one rate cut this quarter, the case for easing has weakened. Chief Economist Huw Pill and other hawkish members may push for further delays, especially with inflation expectations still elevated.

Bank of England divided as inflation challenges rate cut path

The Monetary Policy Committee (MPC) remains split on the timing of monetary easing. Although many economists still anticipate one cut in Q3, the BoE is unlikely to accelerate the pace. Sticky inflation, especially in the services sector, limits the central bank’s flexibility.

BoE officials continue to stress the importance of anchoring inflation expectations, suggesting that a cautious approach—one cut per quarter—remains the most likely path forward.

Trump agrees to 19% tariff deal with Indonesia ahead of August deadline

US President Donald Trump announced a tentative agreement with Indonesia to set tariffs at 19%—lower than the previously threatened 32%. Trump stated that the deal secures full US access to the Indonesian market and includes significant purchases of American energy, agricultural goods, and aircraft.

The agreement is the latest in a series of bilateral trade deals ahead of Trump’s August 1 tariff escalation. Similar pacts have been announced with the UK, Vietnam, and China.

However, many of these deals retain partial tariffs, keeping global trade uncertainty elevated. For example, Canada’s latest arrangement still involves a 30% tariff, underscoring Trump’s ongoing use of tariffs as a policy tool for revenue and leverage.

Outlook: What traders and investors should watch

For UK markets: Upcoming wage growth and unemployment data will be critical for shaping rate expectations.

For global trade: Confirmation of the Indonesia deal and other bilateral agreements will impact commodities, equities, and currency markets.

For central banks: Rising inflation combined with global trade disruptions may delay rate cuts in the US, UK, and Canada.