Inflation climbs to 3.8% in June

Rising food and fuel costs pushed UK inflation up to 3.8% in June from 3.3% in May, official figures have shown.

The rise means inflation is now well above the 2% target, and may reduce the chance of a cut in UK interest rates.

The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth.

The RPI inflation measure - often used as a benchmark in pay negotiations - rose to 4.6% in June from 4.3% in May.

Rate dilemma

The figures, which came in above forecasts for the third month in a row, mean the Bank of England will now have less breathing space to cut interest rates.

The Bank is currently trying to balance growing evidence of an economic slowdown against the problem of rising inflation.

"The Bank of England can't cut rates until it is convinced inflation is moving downwards," said James Knightley, economist at ING.

Food and non-alcoholic drinks were the main factors fuelling the rise, with prices increasing by a record 2.1%, the ONS said.

Meanwhile, surging oil prices have driven up the cost of fuel with the average price of petrol increasing by 5.3p a litre