Inflation Climbs to 3.5% as Fuel Prices Jump Before the Budget
Prices rose 3.5% in the year to September, up from 3.1% in August and above the 3.4% forecasters expected. Motor fuel made the largest contribution: petrol rose 8.2p in a single month to 169.5p a litre and diesel 10.7p to 192.5p. By law this figure sets April’s rise in working-age benefits.
Two cautions on the detail. The 3.5% is the consumer prices index; the measure that includes housing costs rose 3.6%, and division figures differ between the two, so neither should be quoted without saying which. And these fuel prices are not records, as has been reported in places — petrol is the highest since August 2022 and diesel since July 2022. Underneath the headline, core inflation rose to 2.8% and services to 3.7%, while food was unchanged at 1.3% and actually fell on the month. That split is why economists read the same release in opposite directions. One at J.P. Morgan Personal Investing warned that accelerating services inflation “will create concern that we are starting to see second round inflationary effects beyond energy prices”. One at ING looked at the identical numbers and said there is “zero sign that the UK’s inflation shock is broadening out beyond energy. Second round effects are so far non-existent.” Grant Fitzner, the chief economist at the Office for National Statistics, called the increase “notable”. Markets now price a rise in Bank Rate from 3.75% to 4% on 5 November at close to a certainty.