UK Inflation Surges, Global Markets React

UK inflation rose unexpectedly to 3.6% in June, the highest rate since January 2024, driven largely by rising food and motor fuel costs and surpassing analysts’ expectations. The persistent inflation is intensifying cost-of-living pressures and complicates the Bank of England’s approach to future interest rate cuts. Most economists still anticipate a rate cut in August, but policymakers are likely to proceed cautiously due to ongoing economic challenges. Chancellor Rachel Reeves acknowledged household hardships and suggested potential tax rises may be needed to address fiscal issues. Global market sentiment has been negatively affected by trade uncertainties and concerns over the sustainability of government debt. Major stock indices have declined as investors reassess expectations around monetary easing and prepare for continued volatility.