Inflation hits 3.5% as rising cost of fuel sends prices soaring to highest level this year - sparking fresh headache for Andy Burnham ahead of next week's Budget

Published: 02:06 EDT, 21 October 2026 | Updated: 02:42 EDT, 21 October 2026 UK inflation has accelerated to its highest level in nearly a year as surging petrol and diesel prices pushed up the cost of living, official figures revealed today.The rate of Consumer Prices Index inflation rose to 3.5 per cent last month from 3.1 per cent in August, the Office for National Statistics (ONS) confirmed.The September rate is watched closely because it is typically used to decide the level for increasing many benefits - and the latest data comes a week before the Budget.Most forecasters had been expecting the CPI rate to have risen to 3.4 per cent in September, according to a consensus provided by Pantheon Macroeconomics.But the rate confirmed by the ONS today was 0.1 percentage point higher. Inflation is now at its highest level since October 2025, when the rate was 3.6 per cent. Prices across the transport industry were the biggest contributor to higher inflation, after average petrol and diesel prices reached their highest level in four years.ONS chief economist Grant Fitzner said: 'Inflation climbed notably in September to its highest annual rate in almost a year. Increased fuel prices were again the main driver, with the cost of diesel the highest since July 2022.'Other upward pressures included airfares and, to a lesser extent, computer games and live events, which are often volatile. These were partially offset by the cost of hotel stays, where prices rose by less than this time last year.'The annual cost of both raw materials and goods leaving factories continued to rise, driven by higher crude oil and petrol prices, respectively.'Overall inflation has been rising over the summer, fuelled by the Middle East energy shock which has pushed up the price of fuel and household energy.Higher motor fuel prices were a major contributor to higher inflation in September – which is now well above the 2 per cent target that the Bank of England is set.This rise is largely driven by diesel, with average increasing to surpass £2 a litre for the first time ever at the beginning of this month, according to RAC figures.Martin Beck, chief economist at WPI Strategy, said: 'Inflation rose more sharply than expected in September, and the uncomfortable news is that price pressures are becoming more widespread.'CPI inflation climbed to 3.5 per cent from 3.1 per cent in August, the third successive increase and above consensus expectations. Higher petrol prices again accounted for much of the rise, but the underlying details offered less reassurance.'This can no longer be dismissed quite so easily as simply an energy shock. Core inflation rose to 2.8 per cent from 2.6 per cent, while services inflation increased to 3.7 per cent from 3.4 per cent. The Bank's preferred measures of underlying services inflation also rose to 3.9 per cent. PM Andy Burnham and Chancellor John Healey at the Labour Party conference last month'With inflation exceeding expectations across several measures, the risk of higher energy costs feeding into more persistent domestic inflation pressures is becoming harder to ignore.'The International Monetary Fund (IMF) recently warned that cost-of-living crises fall harder on poorer households who dedicate a larger proportion of their income to everyday essentials such as food and energy.The September inflation rate is typically used to decide the level of increase for many benefits, such as universal credit, tax credits and disability benefits.This rate is also a key part of the pension triple lock, which is used to decide how much pensions will increase by in the following April.But the increase is based on either this inflation rate, average earnings growth between May and July, or 2.5 per cent.State pensions are, therefore, expected to increase by 3.9 per cent next year based on wage growth figures which have already been published by the ONS.