Live: Inflation expected to rise in September
What did August’s inflation data show?
Inflation rose to 3.1% in the year to August, up from 2.9% in July, according to the ONS.
August’s rise was driven by sharp rises in the price of fuel, which had been rising since February due to the Iran war.
Grant Fitzner, chief economist at the Office for National Statistics, said rising crude oil and petrol prices increased the cost of raw materials and price of goods leaving factories.
Higher airfares, in particular for long-haul flights, also contributed to the rise in inflation.
Where has inflation gone recently?
At the start of the year, most economists expected inflation to return to the 2% target in 2026, but the Iran war meant forecasts had to be revised.
Following a few months of easing inflation in the first half of 2026, price growth started to rise again in July, and forecasters expect this to keep rising for the remainder of the year and into 2027.
Energy price hikes expected to lead to higher inflation later this year
The Ofgem energy price cap rose by 4% on 1 October, bringing the average household energy bill to £1,723 per year.
Energy bills were pushed up because of the shock the Iran war has had on global energy markets.
Higher energy bills are particularly relevant to rising inflation as almost every household in the UK is exposed to energy price hikes, meaning costs go up for millions of households around the country.
This is set to get worse at the start of 2027, as energy consultancy Cornwall Insight, which is well-renowned for the accuracy of its price cap forecasts, expects energy bills to rise by another 16%.
Such an increase would bring the average energy bill to £1,999 in the first quarter of 2027 – an increase of £276 compared to the October price cap.
Why is war in the Middle East causing price hikes in the UK?
Since 28 February, the Iran war has put major pressure on the global economy, disrupting trade and leading to price increases across the world.
In particular, the conflict has meant that the Strait of Hormuz, a narrow waterway between Iran and Oman through which around 20% of the world’s oil is transported, has been shut, pushing up oil prices.
As oil is used in the production of many of the goods we consume daily, prices have risen. In particular, the price of energy and fuel have soared due to the conflict.
As the conflict is still ongoing and trade has not returned to normal, experts believe inflation will continue rising in the UK.
What to expect from tomorrow’s inflation data
Experts believe tomorrow’s inflation data will show that price growth accelerated again in September as the global economy is still dealing with the shock of the Iran war.
Most economists believe UK inflation will remain above the Bank of England’s target level of 2% for at least the rest of 2026 and into 2027.
The central bank’s latest projections show that prices could rise to an average of 3.75% in the final quarter of 2026, of which September is the first month.
The BoE then expects inflation to edge up to around 4% at the start of 2027 before starting to fall back to normal over the rest of next year.
These forecasts are echoed by Deutsche Bank who agree that inflation will likely rise in the coming months, also expecting it to reach around 4% by the start of 2027.
What is the difference between CPI, RPI, and CPIH?
The UK’s three main metrics of inflation (CPI, RPI, and CPIH) all measure how much prices have increased, but they all do this in slightly different ways.
The most important measure of inflation in the UK is the consumer prices index (CPI) as it is an internationally recognised statistic and is used by policymakers to help inform their decisions.
To measure CPI each month, the ONS looks at around 180,000 prices across almost 750 typical goods and services to see how prices have changed. This shopping basket is reviewed each year to ensure the statistic keeps up with people’s evolving spending habits.
The retail prices index (RPI) used to be the UK’s official measure of inflation, and usually tracks a little higher than CPI because it includes costs associated with home ownership and is calculated differently.
Despite CPI now being the official measure, RPI is still relevant today as certain taxes (like tobacco duty, alcohol duty, and others) are influenced by it.
Finally, the consumer prices index including owner occupiers’ housing costs (CPIH) differs from standard CPI as it includes the costs of owning, maintaining and living in a home.
What is inflation?
Inflation is a key economic metric that shows how much prices have increased in a set period of time, usually a year.
For instance, if a box of apples cost £10 in one year, but then cost £11 the next year, we can say that it experienced inflation of 10%.
In the UK, the most important way of measuring inflation is through the consumer prices index (CPI), which is updated every month.
The UK’s target level of inflation, like that of most other comparable economies, is 2%. Economists believe this level is a healthy rate of price growth.
When will September’s inflation data be published?
The Office for National Statistics (ONS) will publish the latest inflation data covering September on 21 October at 7am.
The report will contain the latest data for all the UK’s measurements of inflation, including the consumer prices index (CPI), retail prices index (RPI), and the consumer prices index including owner occupiers’ housing costs (CPIH).
The ONS publishes inflation data every month.
