UK Inflation Hits 3.1% in August as Fuel Prices Surge

The UK's consumer price index (CPI) rose to 3.1% in the year to August, up from 2.9% in July, according to data released by the Office for National Statistics (ONS) on 16 September 2026. The increase was driven primarily by sharp rises in petrol and diesel prices, which reached their highest levels in nearly four years. Motor fuel prices rose 23% year-on-year, with petrol climbing 9.1p to 161.3p per litre between July and August—the highest recorded since November 2022. Airfares, particularly for long-haul flights, also contributed to the acceleration. On a monthly basis, CPI rose 0.5% in August, compared with 0.3% in the same month in 2025.

The conflict in the Middle East and resulting disruptions to global oil supplies have underpinned the energy price surge. Brent crude oil exceeded $100 a barrel in recent days, rising from around $73 before hostilities escalated earlier in the year. Core CPI, which excludes volatile food and energy items, remained unchanged at 2.6% year-on-year, while food inflation stayed stable at 1.3%. Grant Fitzner, chief economist at the ONS, attributed the rise to "sharp price rises for petrol and diesel" and higher airfares.

The inflation reading moves further away from the Bank of England's 2% target. The central bank's policy rate stands at 3.75%, and the Bank of England was scheduled to meet on 17 September to decide on interest rate policy. Markets were pricing in at least four interest rate rises by the end of 2027, which would lift the Bank rate to 4.75%. However, the immediate decision was expected to be a hold, with the broader monetary policy outlook uncertain.

Economists have warned of continued inflationary pressure ahead. Paul Dales, chief UK economist at Capital Economics, forecast that inflation will rise to around 3.6% in September and peak at approximately 4.2% in January, driven by the combination of higher oil and gas prices and businesses passing on elevated energy costs. The British Chambers of Commerce predicted CPI will rise further over the final months of the year due to oil price volatility and ongoing Middle East tensions. Capital Economics noted that while the current inflation spike stems from external energy pressures rather than domestic wage-price spirals, the effect has not yet spilled into food and drink prices.

The inflation rise comes as households face renewed financial pressure. According to the Money Advice Trust, nearly half (46%) of people seeking support through National Debtline do not have enough money to cover essential bills monthly, and two in five are behind on energy bills. Chancellor John Healey will deliver his first Budget on 28 October, with inflation posing challenges to economic management. Prime Minister Andy Burnham acknowledged inflation as "a concern" but stated that the underlying UK economy remained resilient, noting the economy expanded 0.4% in July, bolstered by investment in artificial intelligence.