British inflation rises more than expected and hits the highest since Oct 2025

British consumer prices rose by 3.5% in twelve months to September (the highest since October 2025) following 3.1% increase in August and ticked above 3.4% forecast, while monthly inflation cooled a bit with 0.4% increase in September after rising by 0.5% previous month.

Core CPI, excluding volatile food, energy, alcohol and tobacco prices, was up by 2.8% y/y in September, from 2.6% in August and came in line with expectations.

Services price inflation, BoE’s preferred gauge for underlying inflation, jumped to 3.7% in September, up from 3.4% in August and above 3.6% consensus.

UK Producer Price Index Input, which measures the change in the price of goods and raw materials purchased by manufacturers, surged by 8.3% last month from 6.7% increase in August and well above 7.2% forecast, while Producer Prices Output, measuring the change in the price of goods sold by manufacturers, rose by 4.6% in September compared to 3.8% increase previous month and also bet forecast at 4.3%.

Stronger than expected inflation rise last month is expected to increase pressure on the Bank of England for a rate hike in their policy meeting in November and will also boost expectations for more support to households, hit hardest by strong rise in energy prices, seen as main inflation generator last month.