Inflation has accelerated to its highest rate in almost a year after fuel prices climbed last month.
The cost of living has been rising since the summer and economists think it could go higher in the months ahead as household energy bills increase.
Here, the Press Association looks at what was behind September’s rise in inflation and what households can expect in the coming months.
– What is inflation?
Inflation is the term used to describe the rising price of goods and services.
The inflation rate refers to how quickly prices are going up.
September’s inflation rate of 3.5% means if an item cost £100 a year ago, it would now cost £103.50.
It is a higher rate than August’s 3.1%, meaning prices are increasing at a faster pace than they were before.
– What caused inflation to rise last month?
The ONS said the biggest contributor to higher inflation last month came from transport, particularly prices at the pump.
Overall motor fuel prices soared by nearly 30% in the year to September, up from a 23% inflation rise the previous month.
Average petrol prices reached 169.5p per litre and average diesel prices hit 192.5p per litre in September – both their highest prices in more than four years.
Air fares and sea fares were also putting pressure on the overall rate of annual inflation, despite falling in price between August and September.
– What happened to food prices in September?
Annual food and drink inflation remained at 1.3% for the month, staying at the almost five-year low it struck in July.
On a monthly basis, food and non-alcoholic drink prices were 0.2% lower in September than in August.
Items like breakfast pastries, cakes and crisps were pushing up the overall inflation rate, while things like beef, chocolate and fizzy drinks were pulling it down.
The ONS pointed to some experts who say competition between supermarkets to attract shoppers and resist increasing prices is keeping a lid on inflation, but this could change in the future.
September’s inflation is used to calculate how much certain welfare payments will increase each year (Yui Mok/PA)
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Why is September inflation important for the Government?
September’s inflation is used by the Government to determine how much certain welfare payments will increase each year, such as universal credit, tax credits and disability benefits.
The state pension is tied to the triple lock policy, meaning it rises in line with inflation, wage, or 2.5% – whichever is higher.
September’s CPI figure does not beat the 3.9% wage growth figure that had already been published – meaning pensioners are in line for a boost of nearly £500 next year.
The inflation figure is also used to calculate increases in business rates in England, with businesses like pubs, shops and venues set to pay an extra £1.1 billion from next April as a result, according to analysis by tax firm Ryan.
– Where will inflation go from here?
Economists think inflation is likely to accelerate further in the coming months, as the conflict in Iran continues to feed through to energy prices.
It is likely to move higher in October when Ofgem’s price cap on household energy bills rose by 4%, meaning higher prices for typical dual-fuel households over the winter.
Forecasters have warned household bills could soar by another £300 a year from January because of recent oil price spikes.
Some economists think inflation could rise above 4% this winter, and Pantheon Macroeconomics forecast CPI could peak at 4.8% in February.
– What does the latest hike in inflation mean for interest rates?
Many economists believe September’s inflation rise will prompt the Bank of England to raise interest rates next month.
This is because inflation is moving further away from the Bank’s 2% target rate and risks feeding through into other parts of the economy, like shop prices and wages.
Interest rates have been held at 3.75% since the end of 2025, but a hike could push them to 4% when the Bank’s rate-setting committee meets next month.
This influences borrowing costs including mortgages for homeowners.
Thomas Pugh, chief economist at RSM UK, said he thinks higher inflation, combined with other economic indicators like a stronger jobs market, “almost guarantees an interest rate hike next month”.
He added a second rate hike looks likely in 2027 if inflation exceeds 4%.
Higher inflation could put pressure on Chancellor John Healey to address the cost of living in his autumn Budget (Ben Whitley/PA)
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– What does it mean for the Government?
Experts said the latest figures could put more pressure on Chancellor John Healey to address the rising cost of living in his autumn Budget statement next week.
In response to the latest ONS data, Mr Healey said he aims to give “businesses and families some breathing space”.
The Government has already taken steps to ease living costs including by cutting VAT from household energy bills this winter and capping bus fares.
Paul Nowak, general secretary of the Trades Union Congress, said: “The Prime Minister has rightly offered households some breathing space with measures to tackle the cost of living.
“But we need to go further and faster – the Chancellor must put living standards at the centre of next week’s Budget.”
Mr Healey is also facing calls to scrap the planned increase to fuel duty next year amidst soaring prices at the pump.