Annual inflation in the U.K. accelerated in August as the conflict in the Middle East continued to pose upward pressure on fuel prices, official data showed Wednesday.
The consumer price index (CPI) rose 3.1% in the 12 months to August, up from 2.9% the previous month, the Office for National Statistics (ONS) said.
Higher inflation adds pressure on Prime Minister Andy Burnham and Treasury chief John Healey to ease the cost of living for households ahead of the Labour government’s budget update next month.
The Bank of England (BoE) is forecast to maintain its benchmark interest rate at 3.75% on Thursday as the U.K. economy struggles for growth.
To tackle persistently high consumer prices, the U.S. Federal Reserve (Fed) is expected to lift borrowing costs on Wednesday, following a similar move by the European Central Bank (ECB) last week.
With central bank interest rates on the rise – and government bond yields reaching multidecade highs in recent weeks – Healey has pledged to maintain strict fiscal discipline.
But he has not been drawn on whether this means his budget on Oct. 28 will include new tax rises.
Analysts expect inflation to rise toward the end of the year as higher energy costs feed through to bills further, with little sign of a deal to end the Middle East war.
“With the situation in the Middle East looking increasingly fraught, the expectation is that inflation will continue to climb higher until the end of the year at a minimum,” said Richard Carter, head of fixed interest research at Quilter Cheviot.
“For the government, today’s figures are a kick in the teeth for an administration that wants to make easing the cost of living its central mission,” he added.
