Inflation jumps to 3.1% in August

UK inflation rose from 2.9% in July to 3.1% in August, driven by soaring energy prices triggered by the Iran war.

Fuel prices surge across the board

Petrol prices jumped 9.1p to 161.3p per litre, the highest since November 2022, while diesel rose 14.2p to 181.8p per litre. Air fares also climbed 6.2%.

Burnham signals difficult budget ahead

Prime Minister Andy Burnham warned that next month's budget will require tough decisions to keep the economy on track amid global economic pressures.

“We will take difficult decisions to make sure the economy remains on track.”

Bank of England faces rate pressure

The Bank prepares for a Thursday interest rate decision with financial markets predicting a one-in-five chance of a quarter-point rise from 3.75% to 4%.

Core inflation remains stable for now

Service sector inflation held steady at 3.4% and core inflation stayed at 2.6%, suggesting underlying price pressures remain contained despite energy shocks.

Global markets in turmoil

Oil prices soared above $106 per barrel as Middle East fighting intensifies. US bond yields exceeded 5% for the first time since 2023, pushing UK borrowing costs to decades-high levels.

Households face another squeeze

The cost of living crisis deepens as inflation climbs, putting pressure on Chancellor John Healey to provide relief in the October 28 budget despite limited fiscal room.

“Today's figures are a kick in the teeth for an administration that wants to make easing the cost of living its central mission.”

Haldane warns against tax rises

Former Bank of England chief economist Andy Haldane urged the government not to raise taxes, calling it a traditional tax-and-spend approach. Burnham rejected the criticism.

“The market now suspects that this is a traditional tax-and-spend socialist government with better TikTok videos.”