UK Inflation Hits 3.1% on Fuel Price Surge

UK inflation rose to 3.1% in August, driven by higher fuel prices, according to data from the Office for National Statistics.

The latest figures show a 0.2 percentage point increase from July's 2.9%, with transport costs making the largest upward contribution to the monthly change in annual inflation rates.

Josh Pilley, head of multi-asset research at XPS Group, noted that while the inflation figure is in line with market expectations, 'inflationary pressures are likely to remain a concern for policymakers and markets.'

Pilley highlighted energy costs as an important driver, citing the 13% increase in the Ofgem price cap that took effect on July 1 and the further 4% rise due in October.

He also warned that rising gilt yields could erode the fiscal headroom available to the chancellor ahead of next month's Budget.