What is happening to UK prices?
What is happening to UK prices?. UK inflation rose in August, pushed up by higher petrol and diesel prices.
What happened
The rise was in line with what economists had predicted, driven by higher petrol and diesel prices. The prices of hundreds of everyday items, including food and fuel, are tracked by the Office for National Statistics (ONS). The main inflation measure is called the Consumer Prices Index (CPI), external, and the latest figure is published every month. 1% figure reached in October 2022 as gas and oil prices soared in the wake of Russia's full-scale invasion of Ukraine.
While inflation has fallen significantly since then, prices have not. The higher figure for August was mostly caused by higher prices for motor fuel, which rose by 23% compared to August last year. But it can take a year for changes in the cost of food to filter through to the shop floor because of the way supply chains work, so prices could still rise as a result of the widespread disruption caused by the war in Iran.
The wider picture
Inflation soared in 2022 because oil and gas were in greater demand after the Covid pandemic, and energy prices surged again when Russia invaded Ukraine. Oil prices initially fell sharply after the deal was announced, but have risen again since the US and Iran resumed attacks in the Strait of Hormuz in July. As a result, UK petrol prices are likely to climb back up. Precisely because food and energy prices can be very volatile, the Bank of England also considers other economic measures such as "core inflation", which excludes these costs.
Published22 JulyWhat is happening to UK interest rates and will they fall again? In April, the Bank's Monetary Policy Committee indicated it would act "forcefully" if oil prices did not start to fall, with up to six rate hikes in a worst-case scenario. At its June meeting, just after a tentative agreement to re-open the Strait of Hormuz, the Bank held interest rates, but oil prices have since risen. The Bank also looks closely at what is happening to wages and unemployment.
What has been reported
Published5 November 2025What is happening to inflation and interest rates in Europe and the US? 4% in August, the same as in July, with prices there also affected by higher fuel costs. Image source, Getty ImagesPublished14 January 2011Updated 12 minutes agoInflation in the UK rose to 3. 1% in the year to August, the highest rate in five months and above the Bank of England's 2% target. Inflation is widely expected to rise again in the coming months. Inflation is the increase in the price of something over time.
For example, if a bottle of milk costs £1 but is £1. 05 a year later, then annual milk inflation is 5%.
What happens next
How is the UK's inflation rate measured and what does it mean for UK interest rates? This virtual "basket of goods" is regularly updated to reflect shopping trends, with alcohol-free beer, dashboard cameras, and pet grooming equipment among items added in 2026, while premium bottled lager and sheets of wrapping paper were removed. The ONS uses price changes in the basket of goods over the previous 12 months to calculate inflation. The Bank of England looks closely at the inflation figures when deciding whether to increase, lower or hold its base interest rate, which is currently 3.
Putting rates up makes borrowing more expensive, giving people and businesses less money to spend, reducing demand for goods and slowing price rises. But it is a careful balancing act – increasing borrowing costs also risks harming the economy. For example, homeowners face higher mortgage repayments, which can outweigh better savings deals.