Fresh nightmare for Rachel Reeves as UK inflation jumps to 3.6%

Inflation jumped to 3.6% in June, up from 3.4% in May, dealing another blow for Chancellor Rachel Reeves as she comes under mounting pressure over her handling of the economy. It had been expected to remain unchanged from the rate in May, where it had stayed for the previous two months. The news, coming from the Office for National Statistics (ONS), is far above the Bank of England's 2% target.

The pace of price rises in June was pushed up by fuel prices and offset by slower house price rises, the ONS has revealed. "Inflation ticked up in June, driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year," said Richard Heys, acting chief economist for the ONS. "Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year," he added.

The decision will affect whether the Bank of England decides to raise or lower interest rates. Higher rates are able to slow inflation by dampening economic activity.

Following the unexpected inflation jump, the value of the pound has now also risen, which further complicates the picture for the Bank of England at its next meeting on interest rates. The pound was up 0.2% versus the dollar at $1.34. It does remain flat against the Euro, however, which was worth 86.7p.

The ONS added that food prices have also increased for a third month in a row, reaching its highest level in more than a year at 4.5%, though it remains well below the peaks witnessed two years ago.

Last month, Rachel Reeves said she was "determined" to put more money in people's pockets. She said: “I know working people are still struggling with the cost of living.

“That is why we have already taken action by increasing the national minimum wage for three million workers, rolling out free breakfast clubs in every primary school and extending the £3 bus fare cap.

“But there is more to do and I’m determined we deliver on our Plan for Change to put more money into people’s pockets.”