21st October 2026
ONS figures show inflation climbing to 3.5%, adding to pressure on families, businesses and the Government
Britain's inflation problem has taken another unwelcome turn, with the annual rate rising to 3.5% in September as higher petrol and diesel prices pushed up the cost of living.
The latest figures from the Office for National Statistics (ONS), published on 21 October, show that the Consumer Prices Index (CPI) increased from 3.1% in August to 3.5% in September. This is the highest rate since October 2025 and is above the 3.4% that economists had expected.
The broader measure, CPIH, which also includes owner-occupiers' housing costs, rose from 3.3% to 3.6%.
The figures underline a growing concern for the UK economy. Just as households and businesses hoped that inflation might settle down, rising energy costs are threatening to push prices higher again.
Fuel prices are driving the increase
Transport was the biggest upward contributor to the latest rise, with motor fuels playing a particularly important role.
The average price of petrol increased by 8.2p per litre between August and September, reaching 169.5p per litre. Diesel rose by 10.7p per litre to an average of 192.5p.
Both were at their highest levels for several years. Overall motor fuel prices were 29.8% higher than a year earlier, compared with an annual increase of 23% in August.
These increases are particularly significant because fuel costs affect much more than the price motorists pay at the pump.
Lorries, vans and other commercial vehicles move goods around the country. When diesel becomes more expensive, hauliers face higher operating costs. Businesses must then decide whether to absorb those increases or pass them on to customers.
Farmers, tradespeople, delivery businesses and other organisations that depend on vehicles face similar pressures.
The effects can therefore spread gradually through the economy, affecting the prices of goods and services even for people who rarely drive.
The ONS also identified higher air fares and other transport-related costs as contributing factors.
Source: ONS Consumer price inflation, UK: September 2026.
Food inflation is not the whole story
There is some better news for household budgets. Annual food and non-alcoholic drink inflation remained at 1.3% in September, unchanged from August. Prices in this category actually fell by 0.2% during the month.
However, this does not mean that food has become cheap. It means that prices were, on average, 1.3% higher than a year earlier. The increases accumulated over previous years remain part of household spending.
Housing and household services are another concern. Inflation in this category rose to 4.5% on the CPIH measure, while the equivalent CPI category increased to 5.3%.
The ONS also recorded a sharp increase in kerosene prices, which is particularly relevant to households relying on heating oil.
For people in rural Scotland, including Caithness and Sutherland, this deserves particular attention. Many homes are not connected to the mains gas network, and heating oil is an important source of warmth. Households may also have to travel further to reach shops, medical appointments and other services.
A rise in the national inflation rate does not capture every difference between households. Someone living in a well-served town with access to public transport may face a very different set of pressures from someone in a rural area who depends on a car and has to heat an oil-fired home.
The underlying picture is also deteriorating
The concern is not limited to petrol and diesel.
Core CPI inflation, which excludes energy, food, alcohol and tobacco, increased from 2.6% to 2.8%. Services inflation rose from 3.4% to 3.7%, while goods inflation increased from 2.7% to 3.2%.
These figures matter because they offer a broader indication of price pressures across the economy.
Higher fuel costs can initially push up inflation directly. If businesses subsequently raise their prices to cover higher transport, production and delivery costs, the effect can become more widespread.
The latest figures do not prove that a new inflationary spiral is inevitable. Nevertheless, the rise in both core and services inflation suggests that the problem cannot be dismissed as nothing more than a temporary movement in petrol prices.
Restaurants and hotels provided a partial offset, with their annual inflation rate falling from 4.1% to 3.8%. But that reduction was not enough to counter the upward pressure from transport and other categories.
What does this mean for interest rates?
The figures present another difficult decision for the Bank of England.
The Bank's inflation target is 2%, measured using CPI. At 3.5%, inflation remains well above that level, and the latest increase will complicate decisions about interest rates.
Higher interest rates can help restrain inflation by reducing borrowing and spending. However, they also increase pressure on households with mortgages, businesses needing finance and the Government when it borrows money.
There is a further complication. If the principal cause of rising inflation is an international energy-price shock, raising UK interest rates cannot directly make oil cheaper or restore disrupted supplies.
The Bank must therefore weigh the risk of allowing higher prices to become embedded in the economy against the danger of weakening economic activity unnecessarily.
The September figures are likely to strengthen the case for caution over any expectation of near-term interest-rate cuts. Whether the Bank decides to raise rates will depend on the wider evidence, including wages, services inflation, economic growth and the outlook for energy prices.
A difficult backdrop for the Government
The figures also arrive at an awkward time for the Government as it prepares its Budget.
Higher prices put pressure on public expectations for help with household bills, while higher borrowing costs can make government spending more expensive. Meanwhile, businesses facing rising costs may delay investment, reduce recruitment or pass increases on to customers.
There is a danger of a damaging combination: households have less money available for discretionary spending, businesses face greater uncertainty, and policymakers have less room to respond.
The challenge is particularly acute if international energy prices remain elevated. A sustained increase in oil and fuel costs can affect transport, food distribution, manufacturing and household finances simultaneously.
Government decisions on energy security, taxation, public spending and support for vulnerable households will therefore matter. But there is no simple measure that can eliminate the consequences of a prolonged international energy shock without creating costs elsewhere.
The next few months will be crucial
One month's inflation figure does not establish a long-term trend, and the rate can move in either direction as prices and the comparisons with previous months change.
Nevertheless, September's figures are a warning that the progress made earlier in the year may prove fragile.
The immediate question is whether higher fuel prices will remain a temporary disturbance or feed through into a wider and more persistent increase in costs. The movement in core and services inflation makes that question more pressing.
For households, the distinction between inflation falling and prices falling is also important. Even if the annual rate eventually declines, most prices will not automatically return to their previous levels. They will simply be rising more slowly.
For people already struggling with rent or mortgage payments, food, transport and heating, that offers little immediate relief.
Britain does not yet know how far the latest energy-price pressures will spread. What the ONS figures do show is that inflation has moved further away from the Bank of England's target, at a time when many households and businesses have little spare capacity to absorb another round of rising costs.
The real test now is whether this proves to be a temporary setback or the beginning of another prolonged squeeze on household living standards.
Read the full ONS report at
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/september2026