UK Inflation Surges to 3.1%, Putting Pressure on BoE and Government

UK inflation rose to 3.1% in August, up from 2.9% in July, piling pressure on the Bank of England ahead of its latest interest rate decision and adding to the government's challenges ahead of the Budget.

The increase is mostly due to high energy prices, which are now 23% higher than they were a year ago. Richard Carter, head of fixed interest research at Quilter Cheviot, warned that inflation will continue to climb higher until the end of the year at a minimum.

Carter stated, 'UK inflation is beginning to march upwards once again, with August's Consumer Prices Index (CPI) breaching the 3% barrier for the first time since March.' He added, 'With rising energy and transport costs squeezing households and higher borrowing costs limiting fiscal headroom, industry experts react below to the figures and their implications for interest rates, economic growth, and pensions.'

Felix Feather, an economist at Aberdeen, noted that services inflation remained at 3.4%, defying expectations for an acceleration. However, he also stated that household energy bills are set to be a key driver of inflation in the coming months.