UK inflation has jumped higher than economists had expected as prices rose by 3.6%, the Office for National Statistics (ONS) said.
The ONS says the rise was driven by motor fuel and food costs, with food price inflation increasing for the third month in a row.
The figures mean an interest rate cut in August is less likely.
Richard Heys, acting chief economist at the ONS, said: “Inflation ticked up in June, driven mainly by motor fuel prices which fell only sligthly, 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 rates since February of last year.”
The Bank of England expects inflation to peak at 3.7% before falling back to its 2% target.
Responding to the latest inflation data published this morning by the Office for National Statistics, Stuart Morrison, Research Manager at the British Chambers of Commerce said: “With CPI rising by 3.6% in June, off the back of fuel price changes, the daily inflation headache for businesses should not be underestimated. Inflation continues to be a major external concern for the firms we represent, cited by over half of businesses in our latest survey.
“As the Bank of England Governor acknowledged at our annual conference last month, the labour market impact on inflation needs to be closely monitored. The recent employer NICs increase has significantly weakened business sentiment, and hiring may suffer as a result.
“The Bank of England will need to consider carefully further interest rate cuts before the labour market loosens too much. Firms will be watching that delicate balancing act intently.
“Easing cost pressures on business is a crucial piece of the jigsaw to help control inflation. A clear tax roadmap, which includes national insurance, would give firms the certainty they need to plan their investment. Our Blueprint for Growth, published last month, details other practical policies we believe can drive forward the UK economy.”
Read more in The Times.