UK Inflation Hits 3.5% in September as Motor Fuel Prices Climb

UK consumer price inflation rose to 3.5% in the 12 months to September 2026, up from 3.1% in August, the Office for National Statistics said on 21 October 2026. Transport, particularly motor fuels, made the largest upward contribution to the change in the annual rate.

The monthly CPI rate was 0.4%, compared with 0.5% in August.

Motor Fuels Lift Transport to the Top of the Index

Transport’s annual rate rose from 4.6% in August to 6.6% in September. Transport made the largest upward contribution to the change in the annual CPI rate in September. The ONS put transport’s contribution to the CPI rate at 0.94 percentage points.

Motor fuel prices were 29.8% higher than a year earlier, up from 23.0% in August. Petrol averaged 169.5p a litre, up 8.2p on the month, and diesel averaged 192.5p, up 10.7p. The ONS said these were the highest levels since August 2022 for petrol and since July 2022 for diesel.

CPIH rose to 3.6% on an annual basis from 3.3%, and its monthly rate was also 0.4%.

Bank of England Rate
The Bank of England held Bank Rate at 3.75% in September, with six members voting to hold and three voting to raise it to 4%. Its next decision is on 5 November 2026.

Core Prices, Services and Household Bills

Core CPI rose to 2.8% from 2.6%, and core CPIH rose to 3.1% from 2.9%. CPI goods inflation rose to 3.2% from 2.7%, which the ONS said was the highest since September 2023. CPI services inflation rose to 3.7% from 3.4%.

Electricity, gas and other fuels added 0.19 percentage points to the CPIH rate, the largest contribution from that group since September 2025, the ONS said. Food and non-alcoholic drinks prices fell 0.2% on the month, and their annual rate held at 1.3%. Restaurants and hotels made the largest offsetting downward contribution, with their annual rate easing to 3.8% from 4.1%.

IBTimes reports that the annual rate for housing and household services rose from 4.9% to 5.3%. Moneyfacts data from 19 October, as reported by IBTimes, show the average two-year fixed mortgage rate rising from 5.59% at the start of September to 5.93% at the start of October. Moneyfacts also put the average one-year fixed savings rate at 4.41% at the start of October.

Bank of England Faces a 5 November Decision

The Bank of England held Bank Rate at 3.75% at its meeting ending 16 September. Six Monetary Policy Committee members voted to hold, and three voted to raise it to 4%. The Bank said the decision was taken on 17 September 2026.

The Bank’s September Monetary Policy Summary expects CPI inflation to be around 3¾% in the fourth quarter of 2026, up from the 3.2% it projected in July, and slightly above 4% in the first quarter of 2027. The projection uses energy prices as of 14 September.

The Bank attributes the upward pressure mainly to energy. It says conflict in the Middle East has contributed to further increases in crude and refined energy prices. In August, direct energy effects, mostly from motor fuels, accounted for about 0.7 of the 1.1-point overshoot above the 2% target. The Committee judges inflation risks to be tilted to the upside, more so than in July.

The next MPC decision is due on 5 November 2026, when minutes of the meeting ending 4 November will also be published. The next ONS CPI release is on 18 November 2026.

Transport made the largest upward contribution to the change in the annual CPI rate in September.

Japan’s Trade Deficit Widens on Energy Imports

Japan’s trade deficit widened to 1.106 trillion yen, about $7.12 billion, in August 2026, from 294.1 billion yen a year earlier. Ministry of Finance figures, reported by QNA on 16 September, show it was the fourth consecutive monthly deficit. Imports rose 28% to 11.154 trillion yen, and exports rose 19.3% to about 10.048 trillion yen.

Energy was the main driver of the rise in imports. Crude oil imports rose 58.7% and LNG imports rose 29.7%. QNA describes the August deficit as the largest since January.

The UK release measures consumer prices, and the Japanese figures measure trade values. In both, the sources identify energy as the main source of the increase: motor fuels in the UK, and crude oil and LNG in Japan.