UK inflation rose to 3.1% in the year to August, up from 2.9% in July, driven largely by rising petrol, diesel and airfare costs, according to the Office for National Statistics (ONS).
Petrol prices reached their highest level in almost four years, with the average cost per litre climbing 9.1p to 161.3p between July and August – the highest level recorded since November 2022. Diesel prices also rose sharply, and overall motor fuel costs increased by 23% compared with the same month last year.
The rise follows continued disruption to global oil supplies linked to conflict in the Middle East. Oil prices climbed above $91 a barrel, compared with around $73 before hostilities began, and have since surpassed $100 a barrel.
Food and drink price inflation remained steady at 1.3%, suggesting higher energy costs have yet to filter through to other sectors.
The increase pushes inflation further from the Bank of England's 2% target. At its September meeting, the Bank's Monetary Policy Committee voted 6–3 to hold interest rates at 3.75%, with three members pushing for a rise to 4%. Some economists believe inflation could peak at around 4.1% by the end of the year as businesses continue to pass on higher energy costs.
The UK economy grew by 0.4% in July, supported by investment in artificial intelligence, though growth slowed in the second quarter.
Paul Dales, chief UK economist at Capital Economics, said: "Everyone knows that bigger rises in inflation are on their way."
Talk to us about your finances.
