The U.K.'s Office for National Statistics said consumer prices rose 3.5% over the year ending in September, compared with 3.1% a month earlier, as motor fuel costs climbed. The figures were published Wednesday.
The reading came in higher than the 3.4% forecast by most economists, according to The Associated Press. Transport, particularly motor fuels, made the largest upward contribution to the change in the annual rate. Restaurants and hotels made the largest offsetting downward contribution, the ONS said.
Motor fuel prices rose 29.8% in the 12 months to September, compared with a 23.0% rise in the 12 months to August. The average petrol price rose 8.2 pence per litre in the month to 169.5 pence, the highest since August 2022. Diesel rose 10.7 pence per litre to 192.5 pence, the highest since July 2022.
The increase comes as the U.S.-Iran war has disrupted oil and gas shipments through the Strait of Hormuz.
Core CPI, which excludes energy, food, alcohol and tobacco, rose 2.8% in the 12 months to September, up from 2.6% in August. The services inflation rate rose to 3.7% from 3.4%, and the goods rate rose to 3.2% from 2.7%. The broader CPIH measure, which includes owner occupiers' housing costs, rose 3.6%, up from 3.3%.
The Bank of England held its main rate at 3.75% last month and meets next on Nov. 5. Economists expect it to raise the rate to 4% at that meeting, according to The Associated Press.
Markets see a 98% likelihood of a quarter-point rise that would lift the rate to 4% in November, according to LSEG data cited by CNBC. Most traders also anticipate a follow-up move of 25 basis points when the bank meets again in December, according to CNBC.
"With inflation increasing, the pieces are falling firmly into place for a November rate rise," said Suren Thiru, who serves as chief economist for the Institute of Chartered Accountants in England and Wales, according to CNBC.
Chancellor of the Exchequer John Healey is due to present his budget next week. Healey said in a statement that he would maintain fiscal discipline while giving businesses and families "some breathing space," according to CNBC.
Other central banks have already raised rates in response to inflation tied to the Middle East conflict. The European Central Bank raised its three key rates by 25 basis points on Sept. 10, its second increase since the war began. The Federal Reserve raised its benchmark rate by a quarter percentage point on Sept. 16, to a target range of 3.75% to 4%.
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