Scottish economic bulletin: August 2025

Inflation

The inflation rate unexpectedly increased to 3.6% in June.

• Inflation rose from 3.4% in May to 3.6% in June.^[3] The increase in the rate between May and June was partly driven by an increase in the rate of transport price inflation which rose from 0.7% in May to 1.7% in June. There was also a notable rise in the annual inflation rate for alcoholic beverages and tobacco (6.4%, up from 5.4%) and clothing and footwear (0.5%, up from -0.3%).

• There continues to be a marked difference between the rate of goods and services price inflation, although the gap narrowed further in June as services inflation remained unchanged at 4.7% and goods price inflation rose to 2.4%, its highest rate since October 2023. Core inflation (excluding energy, food, alcohol and tobacco) rose to 3.7% (from 3.5%).
• Inflation remains above the Bank of England’s 2% target rate and rose slightly more quickly than forecast in June. However, it remains broadly in line with the Bank’s May forecast which projected inflation to rise temporarily to 3.7% by September.^[4] Inflation is then expected to gradually fall back, although, with the persistence of upside risks to the forecast, the Bank’s Monetary Policy Committee (MPC) held the Bank Rate unchanged in June, continuing its gradual approach to monetary loosening.^[5]