UK inflation jumps more than expected fuelling rate hike expectations

Annual consumer price inflation in the UK rose to 3.5% in September 2026, its highest since October 2025, from 3.1% in August, the Office for National Statistics (ONS) said.

The higher-than-expected reading comes one week before the Labour government presents its annual budget on 28 October, which is expected to address cost-of-living pressures.

The rise was largely driven by fuel price increases. Average diesel prices in September reached their highest level since July 2022, as the US-Iran war sent petrol and diesel prices soaring.

Transport, particularly motor fuels, made the largest upward contribution to the change in annual inflation, the ONS said. Transport prices rose by 6.6% year-on-year, up from the previous month’s 4.6%.

Annual services inflation accelerated to 3.7%. Housing and household services and communication costs rose by 5.3% and 5.8% year-on-year, respectively. Food inflation was unchanged at 1.3%.

Core CPI inflation increased to 2.8% from 2.6%. Compared with August, consumer prices rose 0.4%, following a 0.5% increase.