Inflation rises to 3.6%

Inflation went up slightly from 3.4% to 3.6% in June.

Many analysts had predicted that inflation would remain unchanged last month.

But factors such as petrol and diesel prices led to the figure going up by more than some had expected.

In addition, food price inflation went up for the third month in a row to its highest annual rate since February last year.

Responding to the figures, chancellor Rachel Reeves 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." 

However, she acknowledged there is "more to do" to "put more money into people's pockets". 

What is inflation?

Inflation measures how quickly prices are going up.

So if inflation is high, your money doesn’t stretch as far and it can be harder to save and plan for the future.

The Office for National Statistics measures inflation by tracking the prices of hundreds of everyday items in an imaginary shopping basket, such as milk, tea and bread, as well as larger purchases like cars and TVs.

So the headline inflation figure shows how much the price of these goods and services has gone up.

We should point out though that a fall in inflation doesn’t mean prices are coming down too.

It just means they’re not going up as quickly.

How is inflation linked to interest rates?

The government has set the Bank of England (BoE) a target of 2% inflation.

So when inflation gets too high, the BoE can increase interest rates to bring it back under control and closer to its target.

This base rate affects the interest rates offered by banks and lenders.

A rate increase makes borrowing more expensive and people will have less money to spend elsewhere.

That, in turn, means demand falls, slowing price increases and helping inflation go down.

And if inflation is too low, the BoE may cut interest rates to make borrowing cheaper, encourage spending and drive economic growth.

Last month, the BoE kept interest rates on hold at 4.25%.

What can you do to manage rising costs?

If you’re struggling with the rising cost of living, there are ways to ease the financial burden.

Check your benefits

You might be eligible for financial support from the government, so use our benefits calculator to find out what help you could get.

Review your spending

Take charge of your spending and see where you can make savings with our handy budget planner.

Tackle problem debts

If cost of living pressures have led to you falling into debt, then get in touch for confidential, practical and impartial debt advice.