UK inflation climbed for a second month to a five-month high, with consumer prices rising 3.1% in the year through August, up from 2.9% the previous month, the Office for National Statistics said Wednesday. The reading, the highest since March, matched the median forecast of economists but came in above the Bank of England's own forecast of 2.8%, and was driven by higher pump prices amid the ongoing war in Iran. Services inflation, an indicator of domestic pressures, remained at 3.4%, while core inflation, which excludes energy, food, alcohol and tobacco, was also unchanged at 2.6%. BOE officials meeting this week are expected to keep rates unchanged as a weak labor market has helped contain price pressures from the Middle East conflict so far, though that stance is becoming increasingly difficult to maintain as the war drags on. UK drivers now face the most expensive diesel and petrol costs since 2022, with oil prices above $100 a barrel, and BOE Governor Andrew Bailey warned that new risks are coming into play, particularly for food prices, amid extreme drought in the UK and the looming impact of El Niño. A Bloomberg Economics analysis found that household energy bills could jump by about 25% when the UK price cap set by regulators resets in January, which would push CPI inflation above 4% in 2027 and pile pressure on Prime Minister Andy Burnham to deliver fresh support for households at a time when the public finances are already under pressure.
UK inflation hit a five-month high of 3.1%, above BOE forecast, keeping rate-cut hopes in check and supporting sterling ahead of the BOE decision.
