Inflation in the U.K. Accelerated to a Five-Month High

In August, inflation in the United Kingdom accelerated to 3.1% year-over-year—up from 2.9% in July—according to data released by the country’s Office for National Statistics. Reuters notes that this is the highest rate in the past five months. The data was released one day before the Bank of England’s meeting, where market participants expect the British central bank to announce that it will keep interest rates unchanged, despite rising price pressures.

The Consumer Price Index (CPI) in the UK accelerated from 2.9% in July to 3.1% in August. Although this acceleration was the sharpest in the past five months, the figure was generally in line with expectations — this is precisely the August inflation figure that economists surveyed by The Guardian and Reuters had forecast amid rising energy prices due to the escalation of the conflict in the Middle East. The Bank of England, for its part, had forecast in July that the year-over-year inflation rate in August would be 2.8%. According to data from the Bank of England, rising gasoline prices were the biggest contributor to CPI growth last month.

Meanwhile, the core CPI—which excludes volatile food and fuel prices—stayed at 2.6% in August for the fourth consecutive month, Reuters notes. Inflation in the British services sector also remained unchanged at 3.4%—a figure closely monitored by the Bank of England, as it reflects wage growth and long-term inflationary pressures.

The release of inflation data in the U.K. comes one day before the Bank of England’s meeting. The escalation of hostilities in the Middle East is causing turbulence in global financial markets and driving up oil prices, which ultimately increases the likelihood of renewed pressure on British businesses and households, The Guardian reports. Gasoline and diesel prices in Britain have reached new highs in recent weeks, comparable to prices at the start of the Middle East crisis, the newspaper notes. Specifically, the average price of gasoline was about 170 pence per liter ($2.29), while diesel fuel cost more than 191 pence ($2.57).

In July , the Bank of England left interest rates unchanged, warning that a worst-case scenario in the Middle East—involving a further escalation of the war— could push inflation in the UK up to 4.5% by mid-2027. Nevertheless, at its next meeting on September 17, the regulator, according to Reuters estimates, will most likely focus on core inflation indicators, which are less affected by rising energy prices. Overall, market participants estimate the probability of the Bank of England raising interest rates by a quarter of a percentage point as early as this Thursday at one in three, the agency adds. However, by the end of 2026, markets have already fully priced in two interest rate hikes in Britain, Reuters notes, explaining that this reflects concerns about the impact of surging energy prices on overall inflation.

Brent contracts for November delivery soared to $109 per barrel this week, but then—following data showing an increase in U.S. fuel inventories —their rise slowed slightly: at the time of publication, they are trading at around $107, which nonetheless represents an increase of nearly 8% over the past five days, according to MarketWatch data.

This article was AI-translated and verified by a human editor