UK inflation increased more than expected last month, sending the pound higher as Bank of England interest rate expectations were dampened.
The consumer price index rose 0.3% in the month of June, the Office for National Statistics revealed, up from the previous monthly rate of 0.2% and more sharply than the 0.1% increase that economists had predicted.
This meant that the annual rate of UK CPI increased to 3.6%, up from 3.4% previously and higher than the 3.4% average forecast, which remains well above the BoE's 2% target rate.
In May, the Bank predicted that inflation would rise to a peak of 3.7% by September, before falling again to its target rate.
ONS acting chief economist Richard Heys said: “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.
“Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year. However, it remains well below the peak seen in early 2023.”
Core CPI, which excludes more volatile prices such as fuel and food, jumped 3.7% year-on-year, increasing from 3.5% in May, which the market expected to remain the rate in June.
Services CPI remained at 4.7%, when it was forecast to ease to 4.5%.
Sterling rose 0.2% against the dollar to 1.3405, but remained flat against the euro.
The ONS said the publication of the producer price index and services producer price indices data remains paused, as it has been since March, "while we rectify an issue with the chain-linking methods used to calculate these indices".