UK inflation rises to 3.5% in September on fuel costs

UK consumer price inflation rose to 3.5 per cent in the 12 months to September from 3.1 per cent in August, the Office for National Statistics said Wednesday, as motor fuel prices climbed at the fastest pace since 2022.

The reading was above the 3.4 per cent expected in a Reuters poll of economists, according to Babypips and Traders Agency, and it was the highest annual rate in almost a year. Markets now see a Bank of England rate increase in November as close to certain, with traders quoted by CNBC putting the odds at 98 per cent.

The ONS said in its September consumer price bulletin that the largest upward contribution came from transport, particularly motor fuels. Motor fuel prices were 29.8 per cent higher than a year earlier, up from an annual rise of 23.0 per cent in August.

The average price of petrol rose 8.2 pence a litre between August and September to 169.5 pence, the highest recorded since August 2022, the ONS said. Diesel rose 10.7 pence to 192.5 pence, the highest since July 2022. Transport inflation as a whole reached 6.6 per cent, from 4.6 per cent.

Underlying pressure also edged up. Core inflation, which excludes energy, food, alcohol and tobacco, rose to 2.8 per cent from 2.6 per cent. Services inflation, which the Bank of England watches closely as a gauge of domestic price pressure, rose to 3.7 per cent from 3.4 per cent, the ONS said. Goods inflation climbed to 3.2 per cent from 2.7 per cent.

Some prices offset the increase. Restaurants and hotels inflation eased to 3.8 per cent from 4.1 per cent, and the ONS said food and non-alcoholic beverage inflation was unchanged at 1.3 per cent. On a monthly basis, consumer prices rose 0.4 per cent in September.

The ONS also compared Britain with its neighbours, saying the UK rate of 3.5 per cent was above France at 3.4 per cent and Germany at 3.3 per cent. The euro zone as a whole is running hotter than any of them: as Canada News Media reported on Tuesday, euro-zone inflation reached 3.8 per cent as energy prices jumped 18.9 per cent.

Economists said the figures strengthen the case for the Bank of England to act. Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, told CNBC that “with inflation increasing, the pieces are falling firmly into place for a November rate rise.” Scott Gardner, an investment strategist at J.P. Morgan Personal Investing, told CNBC the recent rise had “undone the progress we saw in the spring.”

Babypips reported that the bank’s benchmark rate stands at 3.75 per cent and that markets expect a quarter-point increase to 4 per cent, which would be the first rise in more than three years. Traders Agency, citing CNBC, said most traders also price a second quarter-point increase in December. Neither the Bank of England nor the government has confirmed any decision, and the bank’s rate-setting committee has not yet met.

Chancellor John Healey said after the release that he would keep up “fiscal discipline” in the coming budget while working to give businesses and families some breathing space, according to CNBC as reported by Traders Agency.

The fuel surge traces to the same energy shock that has pushed oil prices sharply higher. Canada News Media reported on Oct. 20 that Brent crude had topped US$111 a barrel for the first time since May. Traders Agency, citing CNBC, said Britain is a net energy importer and is exposed to the disruption in Middle East supplies.

For Canadians, the reading matters in two ways. Canada is an energy producer, so higher crude prices affect its economy differently than Britain’s, but pump prices and household costs are rising on both sides of the Atlantic. Canadians with family in Britain, or travelling there, will also see sterling react to any Bank of England move. Canada’s own price picture is laid out in our province-by-province inflation table.

The next UK inflation figures are due from the ONS on Nov. 18, 2026.

Via the Office for National Statistics, with additional reporting from Babypips, Traders Agency and CNBC.

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