UK inflation accelerated to 3.5% in September 2026, up from 3.1% in August, as surging petrol and diesel prices increased transport costs ahead of Chancellor John Healey’s October 28 Budget. The latest figures from the Office for National Statistics (ONS), released on October 21, exceeded economists’ expectations of 3.4% and marked the highest annual inflation rate since October 2025.
Transport costs were the biggest contributor to the increase, with motor fuel prices rising sharply as international energy markets faced supply disruptions. Average petrol prices climbed above £1.70 per litre, while diesel exceeded £2 per litre, placing additional pressure on motorists and businesses reliant on road transport.
The increase threatens to deepen the cost-of-living squeeze on British households, which are already dealing with higher energy and everyday expenses. Rising fuel costs can also feed into the prices of goods and services as transport operators, manufacturers and retailers face higher distribution and operating bills.
The latest data showed that core inflation, which excludes volatile food and energy prices, also increased to 2.8% from 2.6% in August. The rise suggests that price pressures are not limited to petrol and diesel, although fuel remains a major driver of the latest headline increase.
The figures create a difficult backdrop for the government’s upcoming Budget. Healey faces pressure to support households struggling with rising living costs while managing public finances and maintaining confidence in the UK economy. Higher inflation can make tax decisions and spending commitments more challenging, particularly when government borrowing costs are also under pressure.
The Bank of England is also facing renewed scrutiny over interest rates. With inflation above its 2% target and energy costs increasing, financial markets have raised expectations that policymakers could lift the benchmark rate from 3.75% to 4% at their November meeting. A rate increase would be intended to restrain inflation but could also increase borrowing costs for households and businesses.
The latest increase follows a period in which fuel prices have been driven higher by geopolitical tensions and disruption to global energy supplies. If those pressures persist, they could continue to affect transport, household budgets and business costs in the months ahead.
Attention now turns to the government’s Budget on October 28 and the Bank of England’s next interest-rate decision in November, as policymakers weigh the need to contain inflation against pressure to protect household spending power and economic growth.
