The United Kingdom’s annual inflation rate rose to 3.5% in the 12 months leading up to September, according to data released Wednesday by the Office for National Statistics (ONS). The agency identified an increase in the cost of motor fuels as a primary contributor to the rise in the Consumer Prices Index (CPI).
The September figure represents an increase from the 3.1% annual rate recorded in August and the 2.9% rate in July. The reported 3.5% inflation rate is the highest in the UK over the last 12 months and slightly exceeded the 3.4% median forecast from economists polled by Reuters.
In its report, the ONS detailed that the inflation rate for motor fuels reached its highest point since August 2022. ONS data showed that UK motor fuel prices increased by 29.8% in the year to September.
Following the release of the inflation data, the British pound’s value remained steady against both the U.S. dollar and the euro. Yields on UK government bonds also showed minimal change in morning trading.
Financial market data indicated that investors have adjusted expectations regarding future monetary policy from the Bank of England. According to data from LSEG, markets are pricing in a 98% probability that the central bank will raise its main interest rate by 25 basis points, from 3.75% to 4%, at its next meeting.
Scott Gardner, an investment strategist at J.P. Morgan Personal Investing, commented on the new figures in a note released Wednesday.
“Bank of England policymakers will be looking beyond the headline figure,” Gardner wrote. “Services inflation, in particular, has accelerated in recent months which will create concern that we are starting to see second round inflationary effects beyond energy prices.”
