UK annual inflation reached 3.5% in September, the highest level in almost a year, driven by a sharp rise in fuel costs.
The Office for National Statistics reported the figure on Wednesday, October 21, 2026, surpassing economists' forecast of 3.4%.
The reading adds pressure on the Bank of England as it weighs its next interest rate decision, with the government's Autumn Budget due next week.
Fuel prices lead three-month climb
The annual rate climbed from 2.9% in July to 3.1% in August and 3.5% in September, marking three consecutive monthly increases.
ONS data showed motor fuel prices jumped 29.8% over the year to September, while diesel hit its highest price since July 2022.
ONS chief economist Grant Fitzner named fuel costs as the main driver of the increase.
Higher airfares, computer game prices and live event costs also contributed, while raw material and factory-gate costs continued to rise.
Fitzner said industrial input costs reflected higher crude oil prices, with factory-gate prices pushed up by more expensive petrol.
Britain's reliance on imported energy has left its economy exposed to international supply disruptions.
The conflict involving the United States and Iran, following attacks on Iran and its proxies in February, raised oil transportation costs as Iran threatened shipping through the Strait of Hormuz.
Maritime insurance costs also increased.
Scott Gardner, an investment strategist at J. P.
Morgan Personal Investing, said the figures had reversed earlier improvements in inflation.
He warned that rising services inflation could signal price pressures spreading beyond energy costs, complicating the task for monetary policymakers.
Gardner said Bank of England policymakers would look beyond the headline figure.
Markets priced in a 98% probability that the Bank of England would raise its key rate by 25 basis points to 4% at its November meeting, according to LSEG data.
Most traders also expected another quarter-point increase at the central bank's final meeting of the year in December.
The pound was broadly unchanged against the euro and the US dollar after the release, and UK government bond yields showed little movement.
Debt tops £3 trillion before Budget
Separate figures published Wednesday showed UK public sector net debt was estimated to have exceeded £3 trillion, about $4 trillion, in September for the first time.
Rising debt-servicing costs and weak growth have further constrained the government's financial position.
Chancellor of the Exchequer John Healey faces pressure to address household costs while maintaining fiscal discipline.
Healey said the government would maintain its fiscal rules while supporting growth and easing pressure on households and businesses.
He said the budget would seek to drive growth and give businesses and families some breathing space.
The Conservative shadow chancellor criticized the government's economic management, saying Labour had lost control of the economy and needed urgent action on the deficit.
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described the fiscal challenge as a perilous high-wire act for the Chancellor.
He said higher inflation was increasing demands for cost-of-living support while raising borrowing costs and reducing room for policy measures.
Thiru said the pieces were falling firmly into place for a November rate rise.
Healey is scheduled to present the Autumn Budget next week.
