UK inflation rose to 3.5% in the 12 months to September 2026, up from 3.1% in August, as higher petrol and diesel prices fed through to households. The Office for National Statistics (ONS) published the figures on 21 October 2026, a week before Chancellor John Healey’s Budget. According to the ONS, inflation is now at its highest annual rate in almost a year, and it is well above the Bank of England’s 2% target.
What the ONS figures show
According to the ONS bulletin, the main measures all moved higher in September:
- CPI inflation: 3.5%, up from 3.1% in August. Prices rose 0.4% in the month alone.
- CPIH: which includes owner-occupiers’ housing costs, rose to 3.6% from 3.3%.
- Core CPI: which excludes energy, food, alcohol and tobacco, rose to 2.8% from 2.6%.
- Goods inflation: rose to 3.2% from 2.7%, its highest since September 2023.
- Services inflation: rose to 3.7% from 3.4%.
Fuel prices drove UK inflation higher
Transport was by far the biggest factor. The ONS said it contributed 0.94 percentage points to the annual CPI rate, mainly because of motor fuel. Fuel prices were 29.8% higher than a year earlier, up from an annual rise of 23.0% in August.
Petrol averaged 169.5p a litre in September and diesel 192.5p. Those are the highest prices since August 2022 and July 2022 respectively. We reported in September on diesel prices climbing as the Middle East conflict squeezed supplies.
The largest downward pull came from restaurants and hotels, where hotel prices rose more slowly than a year earlier. MoneyWeek reported that ONS chief economist Grant Fitzner again pointed to fuel as the main driver. He also noted that factory input and output costs were still rising because of crude oil and petrol prices.
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Why prices are rising
The Treasury’s Budget 2026 document links the rise in inflation to energy costs after the start of the conflict in the Middle East. It says monthly average Brent crude prices had risen by around 60% by October, and UK wholesale gas prices by nearly 200%.
Forecasts published with the Budget suggest inflation has further to rise. The Office for Budget Responsibility expects CPI to peak at 3.8% in the first quarter of 2027 before returning to the 2% target by the third quarter of 2028.
What it means for interest rates
The Bank of England’s Monetary Policy Committee held Bank Rate at 3.75% at its last meeting, announced on 17 September 2026. The vote was 6–3, with three members preferring a quarter-point rise to 4%. At that point the Bank expected inflation of around 3¾% in the final quarter of 2026, rising to slightly above 4% in early 2027.
The majority wanted time to see how the energy shock develops. They argued that a softer labour market and tighter borrowing conditions were already holding prices back. The minority argued that waiting risked letting higher inflation become embedded before wage negotiations in 2027. The committee said it “stands ready to act as necessary” to return inflation to target. Its next decision is due on Thursday 5 November 2026.
What it means for households
Higher inflation erodes the value of cash savings that earn less than the inflation rate. It also affects the cost of borrowing, because lenders price mortgages and loans partly on expectations for Bank Rate. Price rises are uneven, though: food inflation was much lower than the headline rate in September, while drivers faced the sharpest increases.
The Budget’s response included extending the 5p fuel duty cut, a £100 energy payment for many households in England from January 2027, and keeping the temporary VAT cut on electricity until July 2027. For background on how the picture has changed, see our earlier explainer on why inflation fell in 2025.
The next ONS inflation figures, for October, are due on 18 November 2026.
This article is general information, not financial advice.
Sources: ONS, Consumer price inflation, UK: September 2026 (21 October 2026); Bank of England, Monetary Policy Summary and minutes, September 2026 (17 September 2026); Bank of England, MPC dates for 2026 and 2027 (accessed October 2026); HM Treasury, Budget 2026 (28 October 2026); MoneyWeek, Inflation live: September 2026 CPI report (21 October 2026).
