Key points

  • UK consumer price inflation rose to 3.1% in August from 2.9% in July, the highest reading since March and above the Bank of England's 2% target.
  • Core inflation held at 2.6% and services inflation stayed at 3.4%, indicating that the monthly acceleration was concentrated in energy-sensitive categories.
  • Producer input prices rose 6.1% from a year earlier and factory-gate prices increased 3.7%, raising the risk that higher costs reach consumers later.

UK inflation climbed to 3.1% in August from 2.9% in July, returning above 3% and reaching its highest level since March. The Office for National Statistics said the Consumer Prices Index rose 0.5% during the month, compared with 0.3% in August 2025. The release lands one day before the Bank of England's next policy announcement, sharpening the trade-off between containing prices and avoiding unnecessary pressure on a cooling economy.

Energy lifted the headline rate

Motor fuels were the clearest source of the acceleration. The Guardian, citing the official data, reported that petrol and diesel prices were 23% higher than a year earlier. Average petrol rose 9.1 pence between July and August to 161.3 pence a litre, while diesel increased 14.2 pence to 181.8 pence. Air fares also rose 6.2% during the month, adding another transport-related push to household budgets.

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Underlying measures were steadier

The headline increase did not extend evenly across the inflation basket. Reuters reported that core inflation, which removes food and energy, remained at 2.6% for a fourth month. Services inflation, watched closely by policymakers because it can reflect wages and domestic demand, stayed at 3.4%. That split matters: it suggests the August rise was led more by imported and regulated energy costs than by a broad reacceleration in locally generated price pressure.

Factory costs point to future pressure

A separate ONS release showed that producer input prices rose 6.1% in the year to August, up from a revised 5.8% in July. Factory-gate prices increased 3.7%, compared with a revised 3.3% previously. Crude oil costs, up 26.7% from a year earlier, made the largest contribution to annual input-price inflation. The figures do not guarantee higher shop prices, but they show that manufacturers face a renewed cost squeeze that could be passed along. Retailers can absorb some increases through margins or hedging, so the timing and scale of any pass-through remain uncertain.

The Bank of England faces a narrow choice

The Bank's policy rate stands at 3.75%. Economists and markets largely expect officials to hold it there at Thursday's meeting, according to Reuters and the Financial Times. Stable core and services measures support patience, while the headline rate and producer pipeline argue against assuming the energy shock will fade harmlessly. Policymakers must also judge whether higher fuel and utility bills influence wages or price-setting beyond the sectors initially affected.

Households and markets will feel different effects

For households, the immediate impact is visible in transport and energy spending, reducing income available for other purchases. Borrowers face a separate risk: persistent inflation can delay rate relief or bring tighter policy back into consideration, affecting mortgages and business finance. Sterling was broadly steady after the release, Reuters reported, indicating that the 3.1% outcome was close to expectations rather than a major surprise for currency traders.

What comes next

Thursday's decision and vote split will show how much weight the Monetary Policy Committee assigns to the energy shock. The next test will be whether core and services inflation remain contained as higher producer costs move through supply chains. A single month's increase does not establish a new trend, but the combination of above-target consumer inflation and faster factory costs leaves the Bank with less room for error if energy prices stay elevated.

Sources

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