“The struggle against soaring prices hit another bump in the road in August, with rising fuel costs and airfares piling fresh financial pressure on households and businesses, driving inflation further away from target.
“Inflation looks set to continue gaining altitude, with rising food and fuel prices and higher energy bills from October setting the stage for inflation to breach 3.5% later this year, despite the looming VAT cut on electricity bills.
“US-Iran hostilities remain the major wildcard for the UK’s inflation outlook, as surging oil prices and continued supply chain disruption raise the risk that inflation stays higher for longer than many, including the Bank of England, currently expect.
“Rising inflation presents an unwelcome pre-Budget challenge for the Chancellor, as it intensifies the cost-of-living squeeze while eroding his fiscal headroom through higher borrowing costs amid persistent financial market volatility.
“August’s inflation increase is unlikely to trigger a rate hike tomorrow, as policymakers will take some comfort from a cooling jobs market. However, it will probably harden the Bank’s hawkish tone and leave the door open to higher rates later this year.”
ENDS
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Chartered accountants are talented, ethical and committed professionals. ICAEW represents more than 211,600 members and students around the world. 81 of the top 100 global brands employ ICAEW Chartered Accountants.* 82% of FTSE 100 companies have an ICAEW member on their board.
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* includes parent companies. Source: ICAEW member data March 2026, Interbrand, Best Global Brands 2025.
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