UK inflation rate hits 3.5% as fuel prices surge

The steepest climb in close to a year

The headline rate climbed to 3.5% last month, up from 3.1% in August, the Office for National Statistics confirmed on Wednesday.

That marks the sharpest annual rise in prices since last October, while the figure also came in above the 3.4% most economists had pencilled in.

It is from the pumps where nearly all of that jump came from.

Between August and September, petrol rose by 8.2p a litre to an average of 169.5p.

Meanwhile, the ONS said that diesel climbed to 192.5p a litre, its steepest price in years.

It comes as this month household budgets are already being squeezed from several directions.

There's a council's plan to hike council tax by 94%, and the ongoing row over whether it's cheaper to leave the heater on low all day as energy costs also climb.

What's driving the UK inflation rate up

ONS chief economist Grant Fitzner pointed the finger squarely at the forecourt.

"Increased fuel prices were again the main driver," he said, "with the cost of diesel the highest since July 2022," in comments reported by the Independent.

He also flagged pricier plane tickets and a small rise in spending on video games and concert tickets. Cheaper hotel stays than a year ago softened the overall increase slightly.

What this means for the Budget

That pressure is already showing up in the public finances.

According to the BBC, the government borrowed £25bn in September, £1.8bn more than the same month last year.

Driven in part by the rising cost of servicing its debt, that figure lands days before Chancellor John Healey delivers his first Budget.

Why is UK inflation rising?

• Petrol rose 8.2p a litre in September to 169.5p, among its highest prices in years.
• Diesel climbed to 192.5p a litre over the same month.
• Fitzner also pointed to pricier plane tickets and a small rise in spending on games and gigs.

What does this mean for the Budget?

Higher inflation raises the government's own borrowing costs just as Chancellor John Healey prepares his first Budget, with the UK already £25bn further into debt for September alone.