There’s been a higher than expected hike to the rate this month
Inflation is at it’s highest rate since the start of 2024. Here, we explain everything you need to know about the latest inflation stats, how it could impact train fares in 2026, and which savings accounts offer inflation-beating rates.
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What is the current rate of inflation in the UK?
The current CPI rate of inflation in the UK is 3.8% for June 2025, according to the latest figures from the Office for National Statistics (ONS). That’s up from 3.6% last month. It was expected to go up to 3.76%.
The current rate of core inflation (which removes more volatile products like food and fuel) in the UK is 3.8%, up from 3.7% last month. Services inflation (which has remained higher than the rest for a while now) moved from 4.7% to 5%.
Meanwhile, RPI (still used in some cases such as rail fares, interest on student loans and air passenger duty) in the UK is up at to 4.8%. It was 4.4% last month.
Historic inflation rates
The graph below shows how CPI inflation has changed in the UK.
source: tradingeconomics.com
What is inflation?
The main thing to remember is even if the rate of inflation is falling, prices are still going up. They’re just increasing by a slower rate.
Check out our What are inflation and deflation? article to learn more about what price changes count towards inflation, as well as explanations of the different measures including CPI and RPI.
When is the next inflation announcement?
The next inflation announcement will be on 18 June 2025.
The ONS publishes inflation figures each month and has confirmed the following dates for upcoming announcements :
- 17 September 2025
- 22 October 2025
- 19 November 2025
- 17 December 2025
What’s changed this month?
Food prices are continuing to grow, sitting at 4.9% for July. That’s the forth month in a row where the rate has increased. Some of the biggest increases were chocolate, coffee and butter (all up by 17.2%-18%) and beef (up by 24.3%).
Another driver to the overall rate was a large increase of transport prices, particularly the cost of petrol and air fares. Hotels booked the night before staying pushed up the rate too.
You can see how prices have changed for individual items in this ONS calculator, while this chart shows the annual CPI rates over 12 months for the last three months.
| June 2025 | July 2025 | |
|---|---|---|
| CPI All items | 3.6 | 3.8 |
| Food and non-alcoholic beverages | 4.5 | 4.9 |
| Alcohol and tobacco | 6.4 | 5.7 |
| Clothing and footwear | 0.5 | 0.3 |
| Housing and household services | 7.5 | 7.4 |
| Furniture and household goods | 0.9 | 0.7 |
| Health | 4.4 | 3.5 |
| Transport | 1.7 | 3.2 |
| Communication | 4.9 | 6.1 |
| Recreation and culture | 3.3 | 3.4 |
| Education | 7.5 | 7.5 |
| Restaurants and hotels | 2.6 | 3.4 |
| Miscellaneous goods and services | 2.7 | 2.2 |
| All goods | 2.4 | 2.7 |
| All services | 4.7 | 5.0 |
| CPI exc food, energy, alcohol and tobacco (core CPI) | 3.7 | 3.8 |
Source: Consumer price inflation from the Office for National Statistics
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Will inflation go up or down?
In July the Bank of England predicted a peak of a 4% rate in September (higher than their May forecast of a 3.7% peak).
After this though the bank thinks it will begin falling back down, reaching 3% at the end of this year, and continuing to fall to the 2% target by the start of 2027.
What does it mean for the base rate of interest?
In July, the Bank of England cut the base rate to 4%, though that was a tight decision. With this higher than expected inflation rate, it’s very unlikely there’ll be one in September and some analysts think we might not see any further cuts this year. Of course, things keep changing and there’s always a chance we’ll get another in November or December.
Right now though markets and economists are still predicting a cut next month, though after that any changes could be slower to implement.
What does it mean for future price increases
This month’s inflation rate is linked to rail fares. When these go up they’ll usually be the July rate plus 1%, meaning we could see 5.8% increases on tickets for ‘regulated fares’. However, the government could add a lower cap.
Here are the main price hikes linked to inflation rates:
- July RPI – rail fares in March
- September CPI – benefits including State Pension in April
- December CPI – student loans in September
Do any savings accounts beat inflation?
If possible, it’s always important to have interest rates higher than inflation – otherwise you’re losing money in real terms.
The bad news then is that savings rates have all been falling, especially on easy access where many providers pay less than 4%. That means there’s a larger risk that you’re getting less than inflation on your cash right now.
However there are still ways to get way above inflation.
The top-paying savings account is the Principality Building Society Regular Saver which offers 7.5%, though only for six months. It’s worth noting that this is a regular savings account. Other top regular savers pay a little less at 7.1% and 7% but they’re for 12 months.
You can also earn 6% with the Santander Edge Saver on up to £4,000, if you hold a Santander Edge account. If you add direct debits (to earn cashback) on the linked current account there’s a monthly fee for the current account, so keep that in mind when comparing savings rates.
However if you’re looking for accounts without these balance restriction, there are still a good number of easy access and fixed rate savings accounts above the inflation rate.
Hi Andy, great summary, very professional. I’m still learning about all of these subjects, so thanks for that!
Do you know what to expect regarding the interest rate of the savings accounts? Are the banks planning to reduce the interest rate soon based on the reduction in the UK inflation?
Government controlled ONS will produce low incorrect data for September in order to determine next years pension & benefit increases then “amend” the data by December so the government can claim that it is too late to correct next years increases.