UK inflation is expected to have risen in August, deepening the cost-of-living squeeze above the Bank of England's 2% target, according to economists surveyed ahead of official data due at 7am BST.
The Consumer Prices Index is forecast to have climbed to 3.1%, up from 2.9% in the 12 months to July, analysts said. Higher fuel costs, following the surge in oil prices since the Iran war began, are expected to have pushed the cost of living higher once again. Petrol and diesel prices now stand at their highest levels since the conflict began, making a visit to the pumps the most expensive it has been since 2022.
Experts at Pantheon Macroeconomics flagged what Rob Wood, their UK economist, described as an "AI-flation" effect that could also be pushing prices upward. The firm believes higher electronics prices linked to chip shortages amid the artificial-intelligence boom could add 0.2 percentage points to inflation.
A rise in inflation could intensify pressure on UK government borrowing costs. Britain's gilt yields hit their highest level since 2007 on Tuesday as the bond-market sell-off continued. The trend was not unique to the UK: yesterday, the average 10-year bond yield across the G7 largest economies rose to its highest level since mid-2008.
The UK is far from alone in grappling with stubborn inflation. US inflation was clocked at 3.4% last week, a reading likely to encourage the Federal Reserve to raise interest rates in tonight's policy decision. Markets will also be watching the Fed press conference at 7.30pm BST for clues on the trajectory of US monetary policy.
Other data releases on the agenda include UK housing prices and rents at 9.30am BST and US retail sales figures at 1.30pm BST.
