UK consumer price inflation accelerated to 3.1% in the 12 months to August, up from 2.9% in July, the Office for National Statistics reported. The increase, which matched forecasts, marked the highest reading since December 2025. Monthly prices rose 0.5% in August, in line with expectations, after a 0.3% increase a year earlier.
The acceleration was driven largely by a 23% annual jump in motor fuel prices, sharply higher than July’s 15.5% rise. Transport costs overall climbed 4.6% year-on-year, accelerating from 3.6%, while housing and household services inflation edged up to 4.9% from 4.6%.
Core CPI, which excludes energy, food, alcohol and tobacco, held flat at 2.6%. The CPI all-goods index rose to 2.7% from 2.2%, the highest level since September 2025, while the all-services index remained at 3.4%. Food and non-alcoholic beverage inflation was unchanged at 1.3%, though ING noted the figure fell to 1.1% in its own calculation.
Petrol averaged 161.3 pence per litre, up 9.1 pence from July and the highest since November 2022. Diesel rose 14.2 pence to 181.8 pence per litre. Air fares increased 6.2% in the month, boosted by long-haul routes. Private rents rose 0.49%, the largest monthly gain since November 2024, while catering prices advanced 0.45%—their biggest rise since February.
Sanjay Raja, chief UK economist at Deutsche Bank, said headline inflation came in 0.25 percentage points above the Bank of England’s forecast and services inflation was 20 basis points higher than projections. He stated that cost-of-living pressures were intensifying and expected inflation to approach 4% around the turn of the year, partly on an anticipated Ofgem energy price-cap rise of more than 20% in January. “The likelihood of rate hikes have strengthened of late,” Raja added.
James Smith, developed markets economist at ING, argued there was “nothing in the latest data that screams a need to hike interest rates,” noting the energy shock had not yet spread to other categories. ING expects the Bank of England to keep rates on hold into 2027, with inflation peaking at around 3.7% early next year, assuming a household energy cap rise of about 25% in January. Smith said any rate increase in November would likely be driven by sustained high energy prices rather than the August data release.
The Retail Prices Index, an alternative measure, stood at 3.4% in August. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose to 3.3% from 3.1%, with its core version holding at 2.9%.
