A person shelters from the rain while walking near the Bank of England building on the day the Monetary Policy Committee lowered interest rates on December 18, 2025 in London, England.
Toby Melville | Reuters
Inflation in the UK rose by a stronger-than-expected 3.5% in the 12 months to September due to higher motor fuel prices.
Economists polled by Reuters had forecast an annual inflation rate of 3.4%.
The September print showed a continuation of the UK’s upward trend in inflation, which was 3.1% in August and 2.9% in July. Inflation in September was the highest in a year.
Britain’s Office for National Statistics said Wednesday that motor fuel inflation has reached its highest level since August 2022, when fuel prices soared in the wake of Russia’s full-scale invasion of Ukraine.
The UK is a net importer of energy, making it vulnerable to external energy shocks, such as the war between the US and Iran and the subsequent struggle to transport oil through the Strait of Hormuz.
UK motor fuel prices rose 29.8% in the year to September, ONS data showed on Wednesday.
of british pound It was flat for both EUR US dollar and yield after data release, british government bonds There was almost no change.
Scott Gardner, investment strategist at JPMorgan Personal Investing, said in a note Wednesday morning that the recent rise in headline inflation has “undone the progress we saw in the spring.”
“Bank of England policymakers will look beyond the headline numbers,” he said. “In particular, services inflation has accelerated in recent months, raising concerns that we are starting to see the effects of a second round of inflation beyond energy prices.We face a different set of challenges to 2021, but the protracted conflict weighs on the UK economy, strengthening the case for rate hikes.”
Markets are pricing in a 98% chance that the Bank of England will raise its key interest rate by 25 basis points to 4% next month, with most traders also pricing in another rate hike of the same size at the central bank’s final meeting of the year in December, according to LSEG data.
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