UK Inflation Rises to 3.5% as Fuel Prices Surge
UK inflation rose more than expected in September, adding to pressure on households and strengthening expectations that the Bank of England could raise interest rates.
The Consumer Prices Index (CPI) increased by 3.5% in the 12 months to September 2026, up from 3.1% in August. Economists had expected inflation to rise to around 3.4%.
Fuel prices drive inflation higher
Transport was the biggest contributor to the increase, with petrol and diesel prices rising sharply following higher global energy prices.
The average price of petrol reached 169.5p per litre in September, while diesel averaged 192.5p. Overall motor fuel prices were almost 30% higher than a year earlier.
Higher energy costs have been linked to disruption in global oil and gas supplies caused by the continuing conflict in the Middle East.
Inflationary pressure is also becoming slightly broader. Core CPI, which excludes energy, food, alcohol and tobacco, increased from 2.6% to 2.8%, while services inflation rose to 3.7%.
What does higher inflation mean for the pound?
Higher-than-expected inflation can support the British pound because it makes interest rate cuts less likely and increases the possibility of higher rates.
Sterling gained against both the euro and US dollar following the inflation figures, with expectations increasing that the Bank of England could raise Bank Rate from its current 3.75%.
However, energy-driven inflation is not necessarily positive for the UK economy. More expensive fuel, heating and transport reduce household spending power and increase costs for businesses.
Could UK inflation rise above 4%?
The Bank of England expects inflation to remain elevated in the coming months. Its latest projections indicate CPI inflation could rise to slightly above 4% in early 2027 if high energy prices persist.
The Bank's next interest rate decision is due on 5 November, while the next UK inflation figures will be released on 18 November.
We will update this page when new UK inflation data is published.