UK Inflation Hits 3.1%, Sparking Interest Rate Hike Fears

The UK's inflation rate has risen to 3.1% in August, up from 2.9% in July, driven by higher oil and gas prices.

This marks a second successive rise in CPI inflation, putting pressure on the Bank of England to raise interest rates this year.

Economists predict that despite a hold at 3.75% being expected tomorrow, multiple hikes are now priced in for the months ahead, with two expected in November and February.

Rob Morgan, chief investment analyst at Charles Stanley Direct, commented: 'Surging energy prices spell more pain in the pipeline for UK consumers and greater pressure on the Bank of England to raise interest rates.'

Samuel Fuller, Director of Financial Markets Online, said: 'Six months on from the start of America’s conflict with Iran, there’s no end in sight to the fighting and its interruption of global oil supplies. Wholesale gas prices are high too, and consumers face a surge in their energy bills next month.'

The European Central Bank increased rates last week, and markets expect the US Federal Reserve to follow suit later today.