Britain's Consumer Prices Index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% in August, according to figures released by the Office for National Statistics (ONS) on Wednesday. The reading came in above the 3.4% median forecast in a Reuters poll of economists and the 3.4% forecast listed on the ForexFactory economic calendar, and took inflation to its highest annual rate since October 2025, when it stood at 3.6%. The Bank of England had predicted a smaller rise, to 3.0%, in forecasts published in July, Reuters reported.

CPI measures how much the prices of everyday goods and services have risen over a year. Transport costs were the biggest driver of September's increase, particularly motor fuels. Average petrol prices rose by 8.2 pence per litre between August and September to 169.5 pence — the highest level since August 2022 — while diesel climbed 10.7 pence to 192.5 pence per litre, its highest since July 2022. Motor fuel prices overall were up 29.8% over the year. ONS chief economist Grant Fitzner said: "Inflation climbed notably in September to its highest annual rate in almost a year. Increased fuel prices were again the main driver, with the cost of diesel the highest since July 2022." Airfares and, to a lesser extent, computer games and live events also pushed prices up, partly offset by hotel stays, where prices rose by less than a year earlier.

Underlying price pressures also picked up. Core CPI, which excludes energy, food, alcohol and tobacco, rose to 2.8% from 2.6% in August, matching the calendar forecast. Services inflation — a measure the Bank of England watches closely as a guide to domestic price pressures — jumped to 3.7% from 3.4%, above economists' forecasts of 3.6%. The broader CPIH measure, which includes owner occupiers' housing costs, rose to 3.6% from 3.3%.

Higher-than-expected inflation typically means traders expect the Bank of England to keep interest rates higher for longer, and Reuters reported the data is likely to add to the case for an increase in interest rates by the Bank in November. The release also comes a week before finance minister John Healey's first budget, and is likely to intensify calls for support for households hit hardest by the jump in energy prices, Reuters said.

Sources: Office for National Statistics (ONS) via PA Media reporting; Reuters; ForexFactory economic calendar.