Summary
- August’s inflation figures were published at 7am, revealing a 3.1% rise.
- Experts forecast inflation would rise as the UK continues to be hit by the economic consequences of the Iran war.
- The Bank of England will announce its latest interest rates decision on 17 September; its decision is likely to be influenced by the latest inflation data
| What is inflation? | CPI vs RPI inflation | When will interest rates fall further? | CPI release dates | MPC meeting dates |
Good afternoon and welcome to MoneyWeek’s live report on August’s inflation figures.
The data will be released on 16 September, so stay with us on this page for rolling commentary on what to expect from the data tomorrow, how it will affect your finances, and the latest breaking news.
When will August’s inflation data be released?
August’s inflation data will be released at 7am, 16 September.
It will be published by the Office for National Statistics (ONS), the UK’s official statistics provider, and will include the latest readings for the consumer prices index (CPI), retail prices index (RPI), and the consumer prices index including owner occupiers' housing costs (CPIH).
Inflation data is released by the ONS every month, covering where prices went in the last full month.
What is inflation?
Inflation is one of the most important economic metrics and allows consumers and the government alike to see how the cost of living is changing.
In simple terms, inflation measures how much the price of goods and services have risen over a set period of time, usually 12 months.
For example, if a leg of lamb cost £10 one year but rose to £11 the next year, we can say the price of a leg of lamb inflated by 10%.
There are multiple ways of measuring inflation, but the main one is the consumer prices index (CPI).
The UK’s target level of inflation is 2%, which economists say is a healthy level of price growth in the economy that stimulates spending and economic growth.
What you should expect from August’s inflation data
Tomorrow’s inflation data is likely to show that price growth increased again in the 12 months to August, possibly rising to above 3% as the UK dealt with high fuel and energy prices.
Almost all economists agree that inflation will keep rising for the rest of 2026, as the economic consequences of the Iran war continue to affect the UK.
In particular, rising oil prices have resulted in higher energy and fuel costs. Petrol prices are at their highest level since the conflict began on 28 February, reaching an average of over 169p a litre on 15 September (over 191p a litre for diesel).
Meanwhile, the energy regulator, Ofgem, confirmed energy costs will increase by 4% from October when the latest energy price cap comes into force.
Higher energy and fuel prices are expected to push up the headline rate of inflation in August and beyond, causing it to remain above the Bank of England’s 2% target.
Where did inflation go last month?
Inflation rose to 2.9% in the year to July, up from 2.6% in the year to June, according to the ONS. The rise was widely predicted by economists who forecast prices to increase over the remainder of 2026.
July’s inflation figure was driven by surging gas, energy, furniture, household goods, clothing, and footwear prices.
The overall increase was partially offset by a fall in transport inflation and the lowest level of food and non-alcoholic drink inflation since 2021.
Where has inflation gone recently?
At the start of the year, most economists expected inflation to return to the 2% target in 2026, but the Iran war meant forecasts had to be revised.
Following a few months of easing inflation in the first half of 2026, price growth started to rise again in July, and forecasters expect this to keep rising for the remainder of the year.
The Bank of England to announce latest interest rates decision on 17 September
Tomorrow’s inflation data will be closely watched by the Bank of England’s Monetary Policy Committee (MPC), who meet every six weeks to decide whether to cut, hold, or raise interest rates.
The central bank has a mandate to keep inflation at 2%, and their main way of achieving this is through changing interest rates.
Broadly speaking, when inflation is too high they will raise interest rates, and when inflation is too low they will lower interest rates.
MoneyWeek will be reporting on the latest MPC meeting, with our live report starting tomorrow afternoon.
Where could interest rates go after August’s inflation data?
Experts think that although August’s data will likely show a rise in inflation, interest rates will probably stay held at 3.75% on Thursday.
The Bank has so far adopted a “wait-and-see” approach to rising inflation, waiting for as much data as possible before moving interest rates.
Economists at Deutsche Bank and Oxford Economics think the Bank will continue this approach for at least the next meeting, though the chances of a rate hike are becoming higher.
While rates have been held at five consecutive MPC meetings, there is growing pressure from within the committee to raise interest rates, with three members, including the Bank’s chief economist Huw Pill, voting to hike rates in July.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “We don’t expect any change to Bank Rate, with the MPC likely to remain on the sidelines relative to other central banks. But we do think the tides are turning on the inflation backdrop.
“Higher energy prices are here to stay for longer than expected. Inflation is no longer missing to the downside as it did throughout Q2-26. The economy has been far more resilient than the BoE envisaged. The labour market is showing some signs of stabilisation. And risks around wage settlements remain skewed to the upside.”
He added that this is weakening the case for keeping rates on hold.
Why higher inflation is a challenge for savers
High inflation means the value of your money erodes over time.
The best way to combat this is by growing your money at a rate higher than inflation, but when inflation is above target, this becomes more difficult.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: “For savers, the challenge is that higher inflation erodes the real value of their cash, and knowing when to stick or twist on looking for a better savings deal becomes tricker given the prospects of interest rates also rising in the near future.
“It is therefore worth households looking at what their savings pots are there to do for them. Accessibility should be the priority for any money stored in case it’s needed at short notice, while for longer-term savings the rate of return will be a priority consideration. Savers should also consider the tax implications of interest earned outside tax-efficient accounts.”
She added: “Whatever tomorrow’s figure, it is a good prompt to review where your money is held, what it is earning and whether it still fits your needs.”
What is your personal inflation rate?
Inflation affects different people to different extents. While the headline rate of inflation was 2.9% in July, not every good or service will have become 2.9% more expensive in the last 12 months.
The price of some goods may have risen faster than this, while other goods may have become cheaper.
To get a good idea of how inflation is affecting your finances, you can calculate your personal inflation rate.
To do this, you should look at what you are spending your money on and then create a basket of goods you buy regularly.
Once you have this basket, you should note down how much it costs every month.
If you compare this to your spending in the same month a year ago (and your spending habits were roughly the same), the difference between the two figures will give you a rough idea of how much prices have gone up or down.
Thank you for following our live coverage of tomorrow’s inflation data release.
We will close our live report for now, but join us tomorrow at 7am when we will be reporting on August’s inflation release live.
Good morning and welcome back to our live coverage of the latest inflation data.
The Office for National Statistics will be publishing the data shortly, so stay with us as we bring you rolling analysis and commentary on what it means for you.
BREAKING: INFLATION RISES TO 3.1% IN THE 12 MONTHS TO AUGUST
What caused inflation to rise?
As expected, sharp rises in the price of fuel pushed inflation higher in August.
Grant Fitzner, chief economist at the Office for National Statistics, said rising crude oil and petrol prices increased the cost of raw materials and price of goods leaving factories.
Higher airfares, in particular for long-haul flights, also contributed to August’s steep rise in inflation.
What about CPIH and core CPI?
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.3% in the 12 months to August, up from 3.1% in July.
Meanwhile, core CPI, which strips out items such as energy and food, remained at 2.6% in August, unchanged from July.
What does it mean for interest rates?
The latest inflation data comes a day before the Bank of England’s Monetary Policy Committee announces its latest base rate decision.
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales (ICAEW), said the August data was “unlikely” to trigger a rate hike tomorrow due to a cooling jobs market, but it could leave the door open to higher rates “later this year”.
Thiru added: “US-Iran hostilities remain the major wildcard for the UK’s inflation outlook, as surging oil prices and continued supply chain disruption raise the risk that inflation stays higher for longer than many, including the Bank of England, currently expect.
“Rising inflation presents an unwelcome pre-Budget challenge for the chancellor, as it intensifies the cost-of-living squeeze while eroding his fiscal headroom through higher borrowing costs amid persistent financial market volatility.”
Could inflation rise higher in 2026?
The Bank of England had expected CPI inflation to reach 3.2% in the last three months of 2026, but with oil and gas prices rising, it could reach higher than this.
The Ofgem energy price cap is rising by 4% in October, lifting the average annual energy bill for a typical dual-fuel household in the UK paying by direct debit to £1,723, from £1,663.
There are also other risks to inflation, including the current El Nino weather pattern, which could hit crop yields and push up food prices.
Hal Cook, senior investment analyst at investment platform Hargreaves Lansdown, said: “Rates have been broadly expected to sit at 3.75% until 2027, but higher inflation adds weight to the three Monetary Policy Committee members who think rates should be increased.
“Adding economic growth of 0.4% in July, compared to forecasts of 0%, makes the decision to increase rates to 4% before year-end even more likely.”
What do you think inflation will be in September?
It's time to get your votes in. What do you think the CPI inflation figure will show next month, after rising by 3.1% in August?
UK’s rate of inflation higher than other major European nations
The UK’s rate of inflation is higher than flash estimates for other major European countries, including France and Germany.
France’s rate of inflation in August was 2.7% while Germany’s was 2.9%.
A closer look at the figures
Transport costs rose steeply to 4.6% in the year to August, up from 3.6% in July, in part due to a surge in motor fuels, the Office for National Statistics said.
Alcohol and tobacco prices also spiked, from 2.5% in July to 2.7% in August, while housing and household services rose from 4.6% to 4.9% over the same period.
The rate of inflation across the communications sector also went up, from 5% in July to 5.3% in August.
Could energy bills rise by 25% in January?
The energy price cap is already set to rise by 4% in October and some experts believe it could surge by as much as 25% in January.
The latest price cap predictions from energy firm EDF forecast the cap to rise from £1,723 in October to £2,165 in January.
Meanwhile, Bloomberg Economics has predicted a similar rise. It expects the cap to increase to about £2,150 a year at the start of 2027.
A spike in energy prices risks putting the vulnerable and elderly at risk, as well as stoking inflation.
Simon Francis, coordinator at charity and campaign group the End Fuel Poverty Coalition, said: “200 days on from the start of the US-Israeli conflict with Iran and it is households in Britain who are being handed the bill.
He added: “With gas prices again on a dangerous upward trajectory, emergency financial support may also be needed to keep people safe this winter.”
John Healey: “Restoring hope won’t happen overnight”
The inflation data published today puts pressure on the chancellor John Healey ahead of his first Budget in October.
Rising inflation could lead to higher interest rates which stunt economic growth.
Commenting on today’s CPI figures, Healey said: “The war in the Middle East is impacting on inflation worldwide. Not just here at home.
"Restoring hope won’t happen overnight, but our early action to cut tax on electricity bills, cap bus fares and cut business rates for pubs, clubs and music venues is providing breathing space."
Is your savings account beating inflation?
The Bank of England is forecasting inflation to average 3.2% in the last quarter of 2026. It could go higher if tensions in the Middle East persist.
However, one in four savings accounts fail to match the Bank of England forecasts, according to data firm Moneyfacts.
Caitlyn Eastell, personal finance analyst at Moneyfacts, said: “Forecasts for inflation remaining above the Bank of England’s 2% target should be a wake-up call for savers.
“If inflation reaches 3.2%, as currently projected in Q4 of 2026, someone with £10,000 in cash would need to earn around £320 in interest over the year just to keep pace with rising prices.”
You can compare the best savings accounts deals on the market through price comparison sites such as Moneyfacts and MoneySuperMarket.
Where do you think interest rates are headed?
The Bank of England’s Monetary Policy Committee will announce its latest decision on bank rate tomorrow at around 12pm. What do you think it will announce?
When will the next inflation data be published?
The ONS publishes inflation data monthly for the preceding month – that’s why the data released today covers the month of August.
The ONS will release inflation data for September on 21 October.
You can find out when the ONS is set to release inflation, GDP and wages data on its website.
Goodbye for now
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