British inflation accelerated sharply in September, reaching its highest level in almost a year as rising fuel prices pushed up the cost of living and increased pressure on the government to
provide further assistance to struggling households.
The Consumer Prices Index (CPI) rose by 3.5% in the 12 months to September, up from 3.1% in August, according to figures published by the Office for National Statistics (ONS) on Wednesday. The increase exceeded the 3.4% rise forecast by economists surveyed by Reuters and marked the highest annual inflation rate since October 2025.
Higher petrol and diesel prices were the principal drivers of the latest increase, reflecting the impact of escalating energy costs linked to the war involving Iran. The figures highlight Britain's vulnerability to international energy market disruptions, particularly because of its substantial reliance on imported natural gas.
The latest data also complicates the outlook for interest rates. The Bank of England had anticipated a more modest increase in inflation to 3.0% in forecasts issued in July. With price pressures now proving stronger than expected, policymakers face a more difficult decision over whether monetary policy should remain restrictive.
The figures could strengthen expectations of an interest rate increase in November, although the Bank will need to assess whether the latest inflationary surge represents a temporary energy-driven shock or a broader and more persistent rise in prices.
Evidence of underlying inflationary pressure also emerged in Wednesday's report. Services inflation, closely monitored by the Bank of England as an indicator of domestic price pressures, accelerated to 3.7% in September from 3.4% the previous month. The result was above economists' expectations of 3.6%.
Core inflation, which excludes volatile food and energy prices as well as alcohol and tobacco, also increased. It reached 2.8%, compared with 2.6% in August, exceeding market expectations and suggesting that inflationary pressures are not confined entirely to petrol and diesel.
The figures arrive at a politically sensitive moment, just one week before Chancellor John Healey is due to deliver his first Budget. The renewed increase in living costs is likely to intensify demands for measures to protect households from higher energy bills and other essential expenses.
The government faces a difficult balancing act. Additional financial assistance could ease the burden on families most affected by rising prices, but policymakers must also consider the potential implications for public finances and the wider inflation outlook.
For the Bank of England, the combination of accelerating headline inflation and stronger services and core price growth presents a particular challenge. Higher interest rates could help contain persistent inflation, but would also increase borrowing costs for households and businesses.
September's figures therefore put both the government and the central bank under renewed pressure, as Britain confronts the competing demands of controlling inflation, supporting household finances and maintaining economic stability.
