UK Inflation Hits 3.1%, Raising Pressure on BoE to Hike Rates

UK inflation accelerated to 3.1% in August, exceeding the Bank of England's (BoE) target and widening the gap between actual price pressures and the central bank's assumptions just before its latest interest-rate decision.

The BoE had forecasted a 2.9% inflation rate for August, but the actual figure was 0.2 percentage points higher, which is small in isolation but takes on more significance when combined with rising oil prices above $100 and already elevated inflation expectations.

Higher petrol and diesel prices pushed transport costs upwards after renewed Middle East fighting lifted crude prices, adding around 0.2 percentage points to CPI, according to Andrew Goodwin of Oxford Economics.

Despite the BoE's July forecast miss, economists still expect the Bank to hold on Thursday, but rising inflation has increased expectations of a quarter-point increase later in the year, potentially as soon as November.