"Everyone knows that bigger rises in inflation are on their way." That's the stark but clear assessment of Paul Dales, UK chief economist at Capital Economics.

The high energy prices seen at the moment and the effect of businesses passing on some of those costs will feed through in the data in the months to come, he says.

He's forecast that the inflation rate will rise to around 3.6% in September, and to a peak of about 4.2% in January.

He says he doesn't expect the Bank of England to raise interest rates tomorrow, "but it makes us a little bit more nervous about our forecast that the Bank won’t raise interest rates at all", he says.

Some other economists think hikes in the Bank rate are more likely.

Raphael Sheridan and Mitchell Labiak
Business producer and business reporter

The fuel price surge since the start of the US-Israel war with Iran doesn't just hit drivers' pockets; it also affects forecourts.

Goran Raven is the owner of RJ Raven, a petrol station business in Essex. He tell us business is slow.

"Things are down. We've got lots of pressure on us at the moment. I'd say we're about 20% down on this time last year," he says.

Goran says changes in the wholesale oil price, which has shifted throughout the Iran conflict, has a "real-time impact on us".

"We only have a small tanks here, so we need a tanker almost everyday at the moment, and we have to pay a daily spot price. When the price goes up, we have to go up with it. There's no way around it," he says.

"The margins here are wafer thin on fuel. People like to think we're earning a lot on it. Unfortunately, we really aren't. It's single digits of pence we earn per litre."

Impact of prolonged Iran war filtering into people's walletspublished at 08:03 BST

08:03 BST

Faisal Islam
Economics editor

While it is not a surprise inflation has accelerated given the renewed pressure on energy prices, it is a sign of further price pressures to come. The impact of a prolonged Iran war is filtering back into people’s wallets.

Inflation rose to 3.1% in the year to August, driven mainly by increases in prices at the pump for petrol and diesel as well as air fares last month.

Since then, oil and gas prices have accelerated further as tensions between Iran and the US intensify, and petrol and diesel prices have risen even further.

With the domestic energy price cap also set to rise further next month, this rise is a sign of what is to come in the coming months.

The rise takes the inflation rate above other major European countries, and will continue the pressure on the Bank of England to raise interest rates to limit the spread of inflationary pressures.

Measures of underlying inflation, for example in the service sector, remained stable. Food price inflation also remained at recent lows.

The Bank makes its next decision on interest rates tomorrow, and while it is forecast to keep rates at 3.75% for now, it is expected by markets to raise rates in the coming months.

Kevin Peachey
Cost of living correspondent

As we've mentioned, fuel costs are the key to the latest rise in the inflation rate.

But Grant Fitzner, chief economist at the ONS, explains that the effect goes beyond the impact on car drivers, and out into the wider economy.

“Rising crude oil and petrol prices increased both the annual cost of raw materials and the price of goods leaving factories respectively," he says.

That said, economists point out that it is a bit early to see the full "second round" impact on prices, such as any sign of food prices rising (they were stable) owing to the cost of production and moving it around.

Image source, Getty Images

Image source, PA Media

Liberal Democrat Treasury spokesperson Daisy Cooper says today's inflation figures should be a "wake up call" for the government.

She says the war in the Middle East is "is once again hitting British families hard".

Cooper calls for Chancellor John Healey to "launch negotiations for a new growth and defence deal with Europe at the upcoming Budget to "grow our economy and make it stronger in the face of global turmoil".

Image source, PA Media

Commenting on the rise in the inflation rate to 3.1%, shadow chancellor Andrew Griffith says "every family will pay the price for Labour’s choices".

He accuses the government of heaping costs on employers, which he says "are being passed on to consumers in the weekly shop".

"And their mad energy policies are pushing up costs and leaving Brits exposed," he says.

Image source, Reuters

Chancellor John Healey says the war in the Middle East is impacting inflation "worldwide", but that the UK economy is "proving resilient".

He says the government has "taken early action to help families and [give] businesses breathing space, by cutting tax on electricity bills, capping bus fares at £2 and lowering rates for pubs, social clubs and live music venues".

"Despite this serious global uncertainty, our UK economy is proving resilient, and our determination to deliver growth in every postcode continues," he adds.

Some signs of cheer for chancellor despite risepublished at 07:17 BST

07:17 BST

Kevin Peachey
Cost of living correspondent

On the face of it, the new chancellor John Healey won't be particularly pleased to see a rising rate of inflation.

The increase will be obvious to consumers - at the pumps through petrol and diesel, and with airfares if they were booking a late summer break. Of course, it all reflects the uncertainty of the situation in the Middle East.

However, core inflation is relatively stable, as are services. That will give the chancellor heart as he prepares his Budget next month.

It may also quell some fears of rises in interest rates, which really wouldn't be the backdrop he needed.

Tom Espiner
Business reporter

The Bank of England is due to announce its latest decision on interest rates on Thursday (we'll have a live page on that tomorrow - one for the diary).

The Bank uses rates as a tool to try to control inflation, with a target rate of 2%.

Raising rates is meant to discourage borrowing and spending and encourage saving. The idea is that when spending falls, price rises slow down, bringing down the inflation rate.

Dearbail Jordan
Senior business and economics reporter

UK inflation rose to 3.1% in the year to August after petrol, diesel and airfares stoked price growth.

Inflation accelerated from 2.9% in the 12 months to July, according to the Office for National Statistics.

Petrol and diesel prices increased further as the conflict in the Middle East continued to disrupt global oil supplies. The cost of flying also jumped during the key month for summer getaways.

Inflation has moved further away from the Bank of England's 2% target.

The bank uses interest rates to control inflation.

The rate currently stands at 3.75% and the Bank of England is meeting on Thursday to decide whether to change it.

Image source, Getty Images

The Office for National Statistics (ONS) says transport, "particularly motor fuels", made the largest upward contribution to the monthly change in inflation.

Prices in the transport division rose by 4.6% in the 12 months to August 2026, up from 3.6% in July.

"The average price of petrol rose by 9.1 pence per litre between July and August 2026, compared with a rise of 0.3 pence per litre between July and August 2025," the ONS says.

Kevin Peachey
Cost of living correspondent

Today's figure is pretty much in line with expectations, but is a rise in the rate.

The increase would have been seen by drivers because it was partly the result of higher motoring costs, particularly fuel.

That was expected and reflects the effect at the pumps on international events.

We'll have more details on what the ONS says about fuel prices in the next post.

The rate of inflation rose to 3.1% in the year to August, according to the latest figures just released by the Office for National Statistics (ONS).

It marks a rise from 2.9% in July.

We'll bring you more in our next post.

Food inflation has so far defied predictions - but not for much longerpublished at 06:54 BST

06:54 BST

Emma Simpson
Business correspondent

The war in Iran sent forecasts for food prices soaring. But up until now, food inflation has defied predictions. It stood at 1.3% in July, the lowest rate since August 2024.

Intense competition in the supermarket aisles and the fact that many food businesses are still benefitting from longer term energy contracts have helped keep a lid on the rate of price rises.

But the pressures in the food supply chain haven't disappeared, they've merely been pushed back.

The latest forecast from IGD, the grocery industry research body, sees food inflation rising to as much as 6.6% next year, and remaining elevated into 2028.

One of the biggest risks, it says, is El Niño weather patterns affecting major food-producing regions.

Ahead of this morning's report, experts have been warning that the price of consumer electronics has been rising and feeding into broader inflation.

Nick Glynne, chief executive of Buy It Direct whose products include appliances and electrical goods, says it has been a "disastrous year" from a cost point of view, but "thankfully" it is "tapering out now", he adds.

The price of Ram - a computer component - has "increased by about 500%, which has meant IT products have increased by about 50% in terms of our cost", Glynne tells Radio 4's Today programme.

"If you're wanting to replace a laptop that still works, why do it when laptops are increased by 50%?" he asks, referencing a drop in sales.

It is not just the price of IT components that is having an impact.

There is "significant inflation in the whole supply chain", he says, referencing the price of oil which goes into plastic, as well as higher shipping costs and "significant wage inflation".

Raphael Sheridan and Mitchell Labiak
Business producer and business reporter

In a forecourt in Essex, motorist Chloe tells the BBC how inflation is affecting her.

She drives a petrol car with a one-litre engine that she says costs around £70 to fill up each week – adding up to around £280 to £300 a month.

"I'm having to limit where I'm going," she says. "I'm normally fine... but it's a lot of money."

Fuel prices have been one of the key drivers of recent inflation figures. Since the US-Israel war in Iran started at the end of February, wholesale oil prices have surged, which has had a knock-on impact on prices at the pump.

"It's getting to the point where I'm travelling further out to try and get cheaper prices now," Chloe says.

Tom Espiner
Business reporter

The expectation of a rise in inflation is mainly driven by higher fuel prices, which have dramatically increased since the outbreak of the Iran conflict.

After the US and Israel attacked Iran and its proxies in February, Iran threatened shipping travelling through the Strait of Hormuz, driving up oil transportation costs, including maritime insurance.

Petrol and diesel prices in the UK declined in June after the US and Iran agreed a ceasefire, but then rose again when the ceasefire collapsed in July.

Earlier this week it was reported petrol and diesel prices hit their highest levels since 2022.

Tom Espiner
Business reporter

Inflation rose to 2.9% in the year to July, according to Office for National Statistics figures last month.

The consensus forecast of economists polled by financial data firm Bloomberg is for inflation to rise to 3.1% in the year to August.

Obviously predictions vary. Some expect a slightly lower figure of 3.0%, others a higher figure of 3.3%.

But the general expectation is for inflation to go up, driven higher by rising fuel costs.

Image source, EPA

Inflation is the increase in the price of something over time.

For example, if a bottle of milk costs £1 but is £1.10 a year later, then annual milk inflation is 10%.

If it had risen to £1.05 instead, then the inflation rate would be lower, at 5%. That would still have been an increase, but a smaller one. When we say the inflation rate has fallen, that often means prices are still rising, just not as quickly.

The price of hundreds of everyday items and services, including food and fuel, are tracked by the Office for National Statistics (ONS) to produce the Consumer Prices Index (CPI), with the latest figure published monthly.

This "basket of goods" - intended as a representative sample of consumer spending - is regularly updated to reflect shopping trends, with alcohol-free beer, dashboard cameras, and pet grooming equipment among items added in 2026, while premium bottled lager, some categories of wine and sheets of wrapping paper were removed.

Benefits, pensions and interest rate decisions are all affected by inflation. For example, the Bank of England has a CPI target of 2%, and will often raise interest rates if the number gets too high.

It's worth noting that CPI does not include costs associated with buying, renting or maintaining a home, or the costs faced by manufacturers - those measures of inflation are released separately.