UK inflation hits 3.5% as diesel tops £2 a litre

UK inflation climbed to 3.5% in September, the highest rate in nearly a year, according to the Office for National Statistics ^[1]. The increase, above the 3.4% forecast by economists, was primarily driven by a surge in petrol and diesel prices, with diesel exceeding £2 a litre for the first time this year. This marks the highest diesel cost since July 2022, as the conflict in the Middle East continues to disrupt global oil flows ^[2].

The war between the US, Israel, and Iran since February has led to the practical closure of the Strait of Hormuz, severely limiting fossil fuel shipments and pushing Brent crude above $100 a barrel ^[1]. As a result, petrol prices have also risen sharply, surpassing £1.70 per litre. Transport-related costs were the biggest contributor to inflation, with airfares, computer games, and live events also adding upward pressure, though hotel prices saw slower growth ^[2].

The Bank of England is widely expected to raise interest rates at its next meeting, amid concerns inflation could breach 4% next year ^[1]. This would be more than double the central bank’s 2% target, fuelled by rising costs across goods and services linked to higher energy prices. The rise comes just days before John Healey is set to deliver his first budget as chancellor, placing immediate pressure on fiscal policy.

ONS chief economist Grant Fitzner noted that factory-gate prices for raw materials and goods continued to rise, reflecting ongoing inflationary pressures in production ^[2]. While some sectors like accommodation saw muted increases, the overall trend points to sustained cost-of-living strain for households. The story was first reported by The Guardian and The Independent.