UK inflation hits 3.1% as fuel costs surge

The UK’s annual inflation rate reached 3.1% in August, surpassing the Bank of England’s official target due to sharp increases in fuel and transport costs. The Office for National Statistics reported that the consumer prices index (CPI) rose by 0.5% from July’s 2.9%, with motor fuels and broader transport expenses as the primary contributors to the annual climb.

Core inflation metrics showed more stability. The core CPI, which excludes volatile categories like energy, food, alcohol, and tobacco, remained at 2.6%. Services inflation was unchanged at 3.4%, while goods inflation increased from 2.2% to 2.7%.

The Monetary Policy Committee will announce its latest decision on Thursday. Bank Rate currently stands at 3.75% after the MPC voted six to three to leave borrowing costs unchanged in July, with three members preferring an increase to 4%.

A British Chambers of Commerce survey of almost 5,000 businesses found 66% cited inflation as a concern, while 52% said fuel costs were putting upward pressure on their prices. The organisation said members of its Economic Advisory Council unanimously expected the Bank to hold rates at 3.75% this week. The Bank’s own July survey of market participants also showed a hold as the central expectation, with respondents assigning an average 71% probability to Bank Rate remaining at 3.75% in September.