UK Inflation Hits 3.1% as Iran War Drives Fuel Prices

UK inflation rose to 3.1% in the year to August, up from 2.9% in July, according to the Office for National Statistics (ONS). The increase was driven by a 23% rise in motor fuel prices, with petrol prices climbing to 161.3 pence per litre and diesel reaching 181.8 pence per litre.

The Bank of England's Monetary Policy Committee is set to meet on Thursday to decide interest rates, which currently stand at 3.75%. The committee warned in July that a worst-case escalation in the Middle East could drive UK inflation to a peak of 4.5% by mid-2027.

Chancellor John Healey said the war in the Middle East is impacting on inflation worldwide and has taken early action to ease the cost of living, including electricity tax cuts and a £2 bus fare cap.