UK Inflation Hits 3.1% as Energy Prices Fuel Concerns

UK inflation rose to 3.1% in August, exceeding expectations and putting pressure on the Bank of England to raise interest rates. The increase was driven by higher petrol prices and household energy bills.

The Office for National Statistics reported that services inflation held steady at 3.4%, while core inflation remained at 2.6%. Average weekly earnings rose 2.9% in the three months to July, but wage growth remains subdued.

Economists are divided on whether the Bank of England will raise rates this week or wait for further evidence that higher inflation is becoming entrenched in the economy. Some, like Yael Selfin, chief economist at KPMG, warn that without a marked improvement in the outlook, the balance of risks could shift towards a rate rise before the end of the year.

The UK government has been criticized for not doing enough to ease the cost of living burden on households and businesses. Chancellor John Healey said the war in the Middle East is impacting inflation worldwide, but Andrew Griffith, shadow chancellor, accused Labour of being responsible for the increase.