UK Inflation Climbs to 3.5% as Fuel Prices Surge

Keypoints:

• UK consumer price inflation rose to 3.5% in September from 3.1% in August
• Economists polled by Reuters had expected 3.4%
• Core inflation, which excludes energy, food, alcohol and tobacco, moved up to 2.8% from 2.6%
• Motor fuel prices rose 29.8% over the year, the fastest pace since August 2022
• The reading is the highest annual rate in a year

The Office for National Statistics (ONS) reported on 21 October that UK consumer price inflation reached 3.5% in the 12 months to September. August stood at 3.1% and July at 2.9%. The rise was slightly hotter than the 3.4% economists expected. It is also the highest annual rate since October 2025.

Fuel did most of the damage. Motor fuel prices climbed 29.8% from a year earlier, the highest rate since August 2022. Britain is a net energy importer, so it is exposed to disruptions in global energy supply. ONS data also showed goods inflation at its highest since September 2023.

The underlying picture moved too. Core inflation rose to 2.8% from 2.6%. That matters because core strips out the most volatile items. It shows whether price pressure is spreading beyond energy.

UK inflation now sits above its neighbors. France recorded 3.4% and Germany 3.3% in September. All three remain well above the Bank of England's 2% target. Scott Gardner, an investment strategist at J.P. Morgan Personal Investing, said the recent rise has undone the progress made in the spring.

Markets barely moved. The pound was flat against the euro and the dollar, and government bond yields were little changed. Higher inflation generally strengthens the case for tighter interest rates, which is why economists read each monthly release closely.

Two details to watch. The September figure is the one conventionally used to set working-age benefit rates from April 2027. The next release, on 18 November, will also be the first to capture the energy price cap increase that took effect on 1 October.