UK CPI inflation accelerated from 2.9% to 3.1% year on year in August, matching market expectations and moving back above the 3% threshold ahead of tomorrow’s Bank of England decision. Consumer prices rose 0.5% month on month, also in line with consensus and stronger than the 0.3% increase recorded in August 2025. CPIH inflation, which includes owner-occupiers’ housing costs, increased from 3.1% to 3.3%.
The acceleration was driven primarily by transport prices, rather than a broad strengthening of underlying inflation. Transport inflation rose from 3.6% to 4.6%, as motor-fuel inflation jumped from 15.5% to 23.0%. Petrol prices increased by 9.1 pence per litre during August, while diesel rose by 14.2 pence. As a result, annual goods inflation climbed from 2.2% to 2.7%, its highest rate since September 2025.
Underlying measures were considerably more stable. Core CPI inflation held at 2.6%, undershooting expectations for 2.7%, while the closely watched services inflation rate remained unchanged at 3.4%. Food inflation also stayed at a relatively subdued 1.3%. Housing and household-services inflation strengthened from 4.6% to 4.9% on the CPI measure, while the equivalent CPIH rate rose from 4.1% to 4.3%, partly reflecting higher owner-occupiers’ housing costs and domestic energy prices.
For the BoE, the report presents a less hawkish picture than the headline increase alone suggests. The rise above 3% reinforces concerns that the energy shock could keep inflation elevated and supports policymakers already favouring tighter policy. However, unchanged core and services inflation offers little evidence that the fuel-driven increase is developing into broader domestic price pressure. With the BoE announcing its decision tomorrow, the data reduces the scope for a dovish shift but may not be sufficient to bring a wider group of policymakers behind an immediate rate hike.
Data summary
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| CPI m/m | 0.5% | 0.5% | 0.3% |
| CPI y/y | 3.1% | 3.1% | 2.9% |
| Core CPI y/y | 2.6% | 2.7% | 2.6% |
| RPI y/y | 3.4% | 3.5% | 3.2% |
Inflation components
| Component | August | July |
|---|---|---|
| CPIH inflation | 3.3% | 3.1% |
| CPI goods inflation | 2.7% | 2.2% |
| CPI services inflation | 3.4% | 3.4% |
| Transport inflation | 4.6% | 3.6% |
| Motor-fuel inflation | 23.0% | 15.5% |
| Food inflation | 1.3% | 1.3% |
| Housing and household services | 4.9% | 4.6% |
Key takeaways
- UK headline CPI accelerated from 2.9% to 3.1%, matching expectations and returning above the 3% threshold one day before the BoE decision.
- The increase was driven mainly by transport and motor fuels. Annual goods inflation consequently rose from 2.2% to 2.7%.
- Underlying inflation did not strengthen correspondingly. Core CPI held at 2.6%, below the 2.7% consensus, while services inflation remained at 3.4%.
- The composition points to an energy-led inflation shock, rather than a broad resurgence in domestic price pressure.
- The report reinforces the concerns of the BoE’s hawkish members and leaves little room for a dovish signal tomorrow. However, stable core and services inflation may not be enough to move the broader committee toward an immediate hike.
