Policymakers say the likelihood of a rate hike is growing the longer energy prices stay elevated
Published Wed, Oct 21, 2026 · 02:43 PM
[LONDON] Britain’s annual rate of consumer price inflation rose more than expected to 3.5 per cent in September from 3.1 per cent in August, official figures showed on Wednesday (Oct 21).
A Reuters poll of economists had shown a median forecast of a rise in consumer price inflation to 3.4 per cent as the surge in energy prices caused by the Iran war intensified last month.
The BoE predicted a smaller rise to 3 per cent in forecasts it published in July.
Britain has been more affected than most Western countries by the war in the Gulf due to its heavy reliance on imported natural gas.
The BoE has said the energy price shock has had a limited impact on broader British inflation so far but Governor Andrew Bailey and other policymakers have also said the likelihood of a rate hike is growing the longer energy prices stay elevated.
Investors expect the central bank to raise its benchmark Bank Rate to 4 per cent next month, the first increase in three years. It has so far kept policy on hold since the outbreak of the US-Iran war in February.
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Figures released on Tuesday showed signs of stabilisation in the labour market, potentially adding to the case for a rate hike by the BoE next month.
Wednesday’s inflation data release comes a week before finance minister John Healey’s first budget when he is expected to offer some further support for households hit hardest by the jump in energy prices. REUTERS