16 September 2026
If you are covering the latest UK inflation rate from the Office for National Statistics, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“UK inflation is beginning to march upwards once again, with August’s Consumer Prices Index (CPI) breaching the 3% barrier for the first time since March. Inflation now stands at 3.1%, up from 2.9% the month before, while core CPI was unchanged. Events in the Middle East are starting to impact the UK’s economic data significantly now, with increased petrol and energy prices, as well as increasing housing costs, having an impact. With the situation in the Middle East looking increasingly fraught, the expectation is that inflation will continue to climb higher until the end of the year at a minimum.
“This is putting a huge amount of pressure on both the Bank of England and the government. With the BoE meeting tomorrow, today’s figures put a rate hike into the category of a genuine consideration, with at least one expected this year. Markets have begun to price in the potential for further rate hikes into 2027, highlighting that the UK has struggled to tame inflation recently and is not expected to do so soon this time around either. The expected pace of the rate hikes may be slightly exaggerated at this point by the market, but really the only thing potentially stopping the BoE from hiking this time around is the employment picture, which remains mixed at best.
“For the government, today’s figures are a kick in the teeth for an administration that wants to make easing the cost of living its central mission. The Budget is quickly coming into focus and with borrowing costs continuing to climb for the UK, measures are going to be limited and thus growth will remain challenged. The government’s response to this is likely to be tax rises, putting a further brake on growth and depending on the nature of those taxes may instead be inflationary themselves.
“Both are finding themselves confronted with the reality of the UK’s precarious fiscal position. Without a return to sustainable and substantial economic growth, fiscal and monetary policy responses are going to chasing the inflation tail for a number of months to come.”
