UK inflation rises to 3.5% as stocks close slightly higher
Key Facts
Annual consumer price inflation in the United Kingdom rose to 3.5% in September 2026 from 3.1% in August, according to Office for National Statistics data published on 21 October. The acceleration in prices coincided with stronger expectations of a Bank of England interest rate increase in November, according to Reuters coverage of British markets. On a monthly basis, the consumer price index rose 0.4% in September, alongside the increase in the annual rate of price growth. The acceleration extended to core inflation, which reached 2.8% year on year compared with 2.6% in August, the ONS said. In the stock market, a later Reuters update said Britain's index ended the session slightly higher.
The rise in inflation encompassed both services and goods, with annual readings in September exceeding August levels in both sectors, according to the ONS. Annual services inflation accelerated to 3.7% from 3.4% the previous month, alongside the rise in headline and core inflation. Annual goods inflation increased to 3.2% in September from 2.7% in August. Transport, particularly motor fuels, made the largest upward contribution to the change in the headline rate between the two months. The ONS said motor fuels made the "largest upward contribution", while restaurants and hotels made the largest downward contribution, partially offsetting the upward pressure on inflation.
The September figures follow a Bank of England decision to hold interest rates at 3.75% at a meeting marked by a split over the need for an increase. A majority of 6 members voted against 3 to keep rates unchanged, according to the September Monetary Policy Summary and meeting minutes. The 3 dissenting members voted for a 0.25-percentage-point increase, which would have taken the rate to 4%. In its statement at that meeting, before the latest consumer price reading was published, the bank described risks to the inflation outlook as "tilted to the upside". A rate increase was therefore already under consideration within the Monetary Policy Committee at its September decision and had the support of members who dissented from the decision to hold.
Following the price data, Reuters reported that money markets were almost certain of a 25-basis-point rate increase in November. The agency linked the strengthening expectations of a rate increase to the inflation report, which capped gains in British stocks during the session. Energy shares supported the index, with BP and Shell among its biggest contributors, according to Reuters coverage. Among individual companies, Aberdeen Group shares fell 4% after the company signalled a slower-than-expected return to inflows in its adviser business. In its later update, the agency described the index as having "edged higher", with the session ending in modest gains.
The upcoming economic calendar begins with the September retail sales report for Great Britain, scheduled for release on 23 October 2026, according to the ONS calendar. The ONS set the release for 7 a.m. UK time, covering retail activity during the same month as the latest inflation data. The release includes estimates of sales volumes and values, providing a view of sales in terms of quantities sold and their recorded value. It also includes seasonally adjusted and non-seasonally adjusted estimates as part of the September retail sales report. The report will be published before the Bank of England's next monetary policy meeting, scheduled for November.
The Bank of England's next decision is due on 5 November 2026, according to the official Monetary Policy Committee meeting calendar, following September's decision to hold rates. The announcement will coincide with publication of the committee's meeting summary and minutes on the scheduled date for the November decision. The bank will also publish its Monetary Policy Report that day, alongside the rate decision documents. The ONS has scheduled the next release of UK inflation data for 18 November 2026. This timetable places the rate decision and Monetary Policy Report ahead of the next inflation reading, while a November increase remains priced into money markets, as reported by Reuters.