UK inflation jumps to 3. 1% as energy costs soar

UK inflation jumps to 3. 1% as energy costs soar. K. is still grappling with a cost-of-living crisis sparked by post-pandemic inflation and surging energy costs that arose in the wake of Russia's full-scale invasion of Ukraine in 2022.

What happened

Motor fuel costs climbed 23% year over year, pushing pump prices to their highest levels since late 2022 amid the Iran war-driven energy shock. 9% in July, as a government-regulated price cap on energy costs was revised sharply upward. ""The question is whether the energy shock is broadening out to other parts of the inflation basket. Even stripping out the distortion from last year's water and car tax hike, the inflation rate for these energy intensive categories has actually fallen this year.

S. -Iran conflict began over six months ago but higher energy costs are still filtering through to business input prices and household spending," he added. For now, it is too early to tell if the energy price spike is evolving into a broader inflation shock but fears will be growing. Image source, Getty ImagesByMichael RaceBusiness reporter, Reporting fromNew YorkPublished11 September 2026There's nothing like talk of energy prices and potential higher borrowing costs to remind us that the summer holidays are well and truly over.

The wider picture

Along with directly driving up costs for homes and businesses, higher energy prices can also make transporting goods more expensive and those extra costs can be passed down to consumers through steeper prices for the likes of food and other staples. Graphic by Miguel Roca-Terry and Jess CarrRelated topicsMonetary Policy Committee (MPC)European Central Bank (ECB)InflationBank of EnglandUS Federal ReserveMore on this storyFed has 'work to do' if price rises don't ease for Americans, Warsh says Published28 AugustOil, gas and borrowing costs surge as fears over Middle East escalatePublished5 days agoBorrowers expecting mortgage rates to drop have hopes dashedPublished8 September

Several economists found that higher energy costs alone have more than erased the benefit from fatter tax refunds this year. Zandi said $930 — or more than half — of that total bill for households comes from higher costs for energy, a category that includes pressures from rising prices on items like gasoline, diesel and jet fuel. 26 trillion in the second quarter, sitting near a record high, according to the New York Fed. 'Something has got to give'Several economists have said that higher energy costs as a result of the war have more than erased boosts from loftier tax refunds as a result of President Donald Trump's "big, beautiful bill.

Inflation across the board is once again rising faster than income is increasing as energy prices surge, government data from August shows. "Related topicsCost of Living US Federal ReserveInflationUS economyUnited StatesMore on this storyOil, gas and borrowing costs surge as fears over Middle East escalatePublished5 days ago The print, which was in line with economists' expectations, marked the first inflation reading above 3% since March.

What has been reported

The country's Office for National Statistics (ONS) said that the spike was largely driven by rising motor fuel costs, which surged 23% year-on-year. K. , a net importer of energy, is particularly vulnerable to external energy shocks. K. government bonds, known as gilts, fell across the curve after Wednesday's inflation print. The inflation print comes before the Bank of England's Monetary Policy Committee announces its latest policy update on Thursday. Andy Burnham's balancing actRising costs also add to the pressure on new Prime Minister Andy Burnham, who has pledged to tackle the cost-of-living burden but is also tasked with balancing the public books and placating the bond market.

James Smith, developed markets economist at ING, said in a note on Wednesday morning that there was "nothing in the latest UK inflation numbers that screams a need to hike interest rates. Smith pointed to food and non-alcoholic beverages inflation, which slipped to 1. "It's a similar story when we look at goods and services the Office for National Statistics has previously defined as having 'high' or 'very high' energy intensity," he said.

What happens next

""With households absorbing back-to-school costs and facing the possibility of higher interest rates, demand heading into the fourth quarter may remain subdued," he said. "Inflation 'unlikely' to make Bank of England hike ratesScott Gardner, an investment strategist at J. Morgan Personal Investing, said in a note that although the inflation increase was "unlikely to convince the Bank of England to hike interest rates just yet," it could raise fresh concerns about the outlook for inflation among policymakers.

"Core and services inflation were relatively resilient in August, but industry surveys suggest firms are facing renewed cost pressures, particularly in manufacturing and services sectors. " Gardner added that his team is watching closely to see what the potential second and third round effects are from higher costs across the economy. "Food prices have started to eke upwards after fertilizer costs increased earlier this year but other pressures could emerge if businesses decide to pass their higher costs on," he said.

"AI is also an important but often overlooked factor at play in the inflation picture as demand for metals, semiconductors and other supply-chain goods grows.

The report has been compiled by The Daily Waves using information reported across cnbc.com, bbc.co.uk. Details are presented according to the information available at the time of publication and may change as authorities, organisers or other relevant parties provide updates.