UK inflation rises to 3.5% as fuel prices climb ahead of Budget

UK annual inflation rose to 3.5% in September from 3.1% in August, the Office for National Statistics said on Wednesday, as higher petrol and diesel prices pushed up costs ahead of the government’s Budget. The increase means prices were rising faster across the UK than they had been a month earlier.

The rise exceeded the 3.4% rate economists had forecast, according to The Guardian. It comes a week before John Healey’s first Budget as chancellor, adding to the economic pressures facing the government as it prepares its plans.

How fuel prices contributed to September inflation

The Guardian reported that petrol had climbed above £1.70 a litre and diesel had exceeded £2 a litre in October. Those prices matter directly to drivers and can also raise costs for businesses that move goods by road. The October pump prices came after the September period covered by the latest inflation figure.

The Guardian linked the rise in oil and gas prices to the conflict involving the US and Israel and Iran. It reported that the Strait of Hormuz had been practically closed to most fossil-fuel traffic, while Brent crude had risen well above $100 a barrel. That disruption helps explain the pressure on fuel prices reported in the UK.

What higher inflation means for interest rates

The Bank of England aims to keep inflation at 2%, well below September’s 3.5% reading. The Guardian reported that officials were widely expected to raise interest rates at their next meeting amid concern that higher energy costs could spread to a wider range of goods and services, including transport and home heating.

The Guardian also reported fears that inflation could exceed 4% next year. The Bank’s next rate decision and the path of prices remain uncertain; for now, September’s figures establish that inflation accelerated as households faced higher fuel costs.