UK inflation jumped higher in September to 3.5% with experts warning that the larger-than-expected increase is bad news for Britons.
The consumer prices index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% the previous month. On a monthly basis, the inflation print rose by 0.4% in September 2026.
Danni Hewson, AJ Bell head of financial analysis, said: “It’s exactly the news households and the chancellor knew was coming but rather hoped wouldn’t actually arrive.
“Just as nights get colder and pressure mounts on budgets, a larger than expected jump in the headline rate of inflation is an unwelcome guest – and one we hoped wouldn’t return.”
The main driver of price increases was a sharp increase in fuel inflation, which jumped 29.8% (having risen 23% in August). The expiry of the government’s temporary VAT cut on family event tickets also pushed cultural services’ inflation higher, while airfares were also higher last month.
David Rees, head of global economics at Schroders, said: “Britain is facing a perfect storm of imported inflation pressures.”
The reading follows Tuesday’s labour market figures, which showed the unemployment rate fell to 4.7% in the three months to August.
Neil Birrell, chief investment officer at Premier Miton, said: “After good news on employment in the UK, we’ve got strong inflation data for September, which is less good news.”
What this means for the Bank of England
Andrew Wishart, senior UK economist at Berenberg, said it “probably guarantees a 25bp interest rate hike at the Bank of England’s 5 November meeting”, an opinion that was echoed by others.
“The upside surprise to inflation paired with resilient economic activity and a stable, if subdued, labour market means that the benefits of raising interest rates outweigh the risks,” he said.
“To prevent the BoE from following up its likely 5 November move with a second rate hike at the subsequent meeting on 4 February, energy prices must fall or activity must soften.”
Jeremy Batstone-Carr, European strategist at Raymond James, added that today’s figures, combined with Tuesday’s unemployment figures, “should prove sufficient support for the first base rate hike of 2026” next month, while Rees said an interest rate hike “now looks like a done deal”.
Three members of the Monetary Policy Committee voted in favour of raising rates at the most recent meeting, with Hewson suggesting that the latest CPI print will be enough to “nudge at least a few MPC members off the fence” and towards a rate hike.
With an interest rate hike at next month’s meeting almost a certainty, Rees suggested all eyes will turn to the Budget on 28 October, as this could have big implications for inflation and the Bank of England policymakers.
“Expectations are low, but any significant fiscal boost would raise the risk that imported inflation becomes more persistent and force the BoE into a longer tightening cycle,” he said.