UK inflation climbs to 3.5 per cent, highest in nearly a year, as fuel costs surge
Consumer price inflation rose to 3.5 per cent in September, its highest rate in almost a year, driven by a surge in fuel costs. Economists warn the rate could climb further, adding pressure on the Bank of England and complicating the Chancellor's Budget preparations.
UK inflation has risen to 3.5 per cent, its highest rate in almost a year, after a sharp increase in fuel costs pushed the Consumer Price Index higher in September. The figure marks a renewed acceleration in price growth and lands just weeks before the Chancellor, John Healey, delivers the Budget.
The pickup was driven principally by fuel, according to the inflation data, with energy costs feeding through into the headline measure. The reading is the strongest since late last year and reverses the more encouraging trend seen over much of 2025, when price growth had been easing.
Economists warned that the rate is likely to rise further in the coming months, a prospect that would intensify pressure on the Bank of England to raise interest rates. Higher borrowing costs would weigh on households already contending with elevated prices and on businesses managing tighter margins.
The timing is awkward for the government. A rising inflation rate erodes the fiscal headroom available to the Chancellor and complicates the calculations behind the Budget, which is expected to set out tax and spending decisions against a less favourable economic backdrop than ministers had hoped for.
Fuel costs have been the decisive factor in the September reading. Movements in pump prices feed quickly into the CPI basket and can shift the headline rate sharply from month to month, making the outlook for inflation sensitive to energy markets over the winter.
The Bank of England now faces a difficult judgement. Raising interest rates is the conventional response to persistent inflation, but doing so risks slowing an economy that is already under strain. The central bank will weigh the September figures against wider evidence on wages, services prices and demand when it next sets policy.
For households, the return of inflation to its highest level in almost a year will be felt most directly at the petrol pump and in energy bills. For the Chancellor, the political difficulty is equally clear: a Budget delivered amid accelerating prices invites scrutiny of whether government policy is adding to cost pressures rather than relieving them.
The September reading therefore marks a turning point in the inflation story of the past year. Having appeared to be coming under control, price growth has reaccelerated, and the question now is whether the fuel-driven spike proves temporary or signals a more durable shift. Much will depend on energy costs and on how firmly the Bank of England responds.
7
