Image source, Getty Images

A former Bank of England deputy governor warns that inflation is "likely to keep rising" for the rest of the year.

Charlie Bean says that while the UK's economy has been "reasonably resilient so far", the impact of rising oil prices due to the US-Iran war will start to have "a more significant effect" as countries run down their existing oil reserves.

"It then ripples down supply chains," he tells the Today programme, adding it could push up wages and other costs for businesses.

Bean says that markets will be watching closely to see whether the government will be "willing to take the difficult decisions necessary to preserve fiscal sustainability, and in particular, to cut spending in certain areas".

"There is still a question mark about the new administration's ability to hold the line," he says.

Image source, Reuters

We've just heard from Nick Butler, a former group vice-president at BP, on Radio 4's Today programme.

He says the oil shock sparked by the Iran war "looks likely to get worse through the autumn" and "could get very serious".

The impact has been "cushioned" over the past six months because the country has been running down existing stocks, he says.

A key oil pipeline in Saudi Arabia has also been badly damaged in a strike carried out last week, which the Saudi government has blamed on Iran-backed militias in Iraq.

The amount of time it takes to repair that line could be a factor in how bad the energy crisis gets, Butler says.

He says it is "understandable" the government has wanted to avoid prompting people to panic buy, but adds there could be "difficult choices" ahead.

He says the government must protect key areas like the health service, food supply systems and vulnerable customers and businesses who are more dependent on energy supplies.

Kevin Peachey
Cost of living correspondent

Perhaps you overindulged during the summer holidays. Maybe you're signed up to the September reset that's trending on social media.

If so, I'll whisper this - there's some good news for anyone who likes chocolate and sweets.

Sugar, jam, syrups, chocolate, and confectionery did go up slightly in price, according to the latest ONS figures, but at a much slower rate than a year ago.

Driven by the slowdown in chocolate-based confectionery, prices were up by just 0.6% in August compared with a year earlier, down from a recent high of 11.9% in October last year, the ONS says.

Ross McKee
BBC News NI

Image source, Emma Ashfield

Nursery worker Emma Ashfield, from Northern Ireland, says the rising cost of raising her eight-year-old daughter is putting increasing pressure on her family.

"Everything is just extremely expensive," she says, pointing to the cost of food, gas, electricity and clothes.

"You are trying to keep food on the table, [buy] clothes, trying to provide for them," Emma says. "You would basically need a second job."

With winter approaching, she says energy costs are another worry: "I find electric very pricey… and it is costly trying to heat my apartment too."

"My wee girl is always wanting the heating on, so that's another thing."

Image source, EPA

We've reported food prices remained steady, with the rate of food inflation holding at 1.3% in the 12 months to August, unchanged from July.

But it's an area economists have been watching, with the Iran war expected to put pressure on prices.

Iran's continued blockade of the Strait of Hormuz has led to higher costs for fuel and fertiliser, both crucial elements of food production.

El Niño weather patterns could also have an impact, as our business correspondent points out.

It's an area that's often keenly felt by households, who see the impact of any price rises reflected in the cost of their weekly shop.

Many will remember feeling the pinch at the peak of the cost-of-living crisis a few years ago, with food inflation peaking at 19.2% in March 2023 in the wake of the pandemic and Russia's invasion of Ukraine.

"Everyone knows that bigger rises in inflation are on their way." That's the stark but clear assessment of Paul Dales, UK chief economist at Capital Economics.

The high energy prices seen at the moment and the effect of businesses passing on some of those costs will feed through in the data in the months to come, he says.

He's forecast that the inflation rate will rise to around 3.6% in September, and to a peak of about 4.2% in January.

He says he doesn't expect the Bank of England to raise interest rates tomorrow, "but it makes us a little bit more nervous about our forecast that the Bank won’t raise interest rates at all", he says.

Some other economists think hikes in the Bank rate are more likely.

Raphael Sheridan and Mitchell Labiak
Business producer and business reporter

The fuel price surge since the start of the US-Israel war with Iran doesn't just hit drivers' pockets; it also affects forecourts.

Goran Raven is the owner of RJ Raven, a petrol station business in Essex. He tell us business is slow.

"Things are down. We've got lots of pressure on us at the moment. I'd say we're about 20% down on this time last year," he says.

Goran says changes in the wholesale oil price, which has shifted throughout the Iran conflict, has a "real-time impact on us".

"We only have a small tanks here, so we need a tanker almost everyday at the moment, and we have to pay a daily spot price. When the price goes up, we have to go up with it. There's no way around it," he says.

"The margins here are wafer thin on fuel. People like to think we're earning a lot on it. Unfortunately, we really aren't. It's single digits of pence we earn per litre."

Impact of prolonged Iran war filtering into people's walletspublished at 08:03 BST

08:03 BST

Faisal Islam
Economics editor

While it is not a surprise inflation has accelerated given the renewed pressure on energy prices, it is a sign of further price pressures to come. The impact of a prolonged Iran war is filtering back into people’s wallets.

Inflation rose to 3.1% in the year to August, driven mainly by increases in prices at the pump for petrol and diesel as well as air fares last month.

Since then, oil and gas prices have accelerated further as tensions between Iran and the US intensify, and petrol and diesel prices have risen even further.

With the domestic energy price cap also set to rise further next month, this rise is a sign of what is to come in the coming months.

The rise takes the inflation rate above other major European countries, and will continue the pressure on the Bank of England to raise interest rates to limit the spread of inflationary pressures.

Measures of underlying inflation, for example in the service sector, remained stable. Food price inflation also remained at recent lows.

The Bank makes its next decision on interest rates tomorrow, and while it is forecast to keep rates at 3.75% for now, it is expected by markets to raise rates in the coming months.

Kevin Peachey
Cost of living correspondent

As we've mentioned, fuel costs are the key to the latest rise in the inflation rate.

But Grant Fitzner, chief economist at the ONS, explains that the effect goes beyond the impact on car drivers, and out into the wider economy.

“Rising crude oil and petrol prices increased both the annual cost of raw materials and the price of goods leaving factories respectively," he says.

That said, economists point out that it is a bit early to see the full "second round" impact on prices, such as any sign of food prices rising (they were stable) owing to the cost of production and moving it around.

Image source, Getty Images

Image source, PA Media

Liberal Democrat Treasury spokesperson Daisy Cooper says today's inflation figures should be a "wake up call" for the government.

She says the war in the Middle East is "is once again hitting British families hard".

Cooper calls for Chancellor John Healey to "launch negotiations for a new growth and defence deal with Europe at the upcoming Budget to "grow our economy and make it stronger in the face of global turmoil".

Image source, PA Media

Commenting on the rise in the inflation rate to 3.1%, shadow chancellor Andrew Griffith says "every family will pay the price for Labour’s choices".

He accuses the government of heaping costs on employers, which he says "are being passed on to consumers in the weekly shop".

"And their mad energy policies are pushing up costs and leaving Brits exposed," he says.

Image source, Reuters

Chancellor John Healey says the war in the Middle East is impacting inflation "worldwide", but that the UK economy is "proving resilient".

He says the government has "taken early action to help families and [give] businesses breathing space, by cutting tax on electricity bills, capping bus fares at £2 and lowering rates for pubs, social clubs and live music venues".

"Despite this serious global uncertainty, our UK economy is proving resilient, and our determination to deliver growth in every postcode continues," he adds.

Some signs of cheer for chancellor despite risepublished at 07:17 BST

07:17 BST

Kevin Peachey
Cost of living correspondent

On the face of it, the new chancellor John Healey won't be particularly pleased to see a rising rate of inflation.

The increase will be obvious to consumers - at the pumps through petrol and diesel, and with airfares if they were booking a late summer break. Of course, it all reflects the uncertainty of the situation in the Middle East.

However, core inflation is relatively stable, as are services. That will give the chancellor heart as he prepares his Budget next month.

It may also quell some fears of rises in interest rates, which really wouldn't be the backdrop he needed.

Tom Espiner
Business reporter

The Bank of England is due to announce its latest decision on interest rates on Thursday (we'll have a live page on that tomorrow - one for the diary).

The Bank uses rates as a tool to try to control inflation, with a target rate of 2%.

Raising rates is meant to discourage borrowing and spending and encourage saving. The idea is that when spending falls, price rises slow down, bringing down the inflation rate.

Dearbail Jordan
Senior business and economics reporter

UK inflation rose to 3.1% in the year to August after petrol, diesel and airfares stoked price growth.

Inflation accelerated from 2.9% in the 12 months to July, according to the Office for National Statistics.

Petrol and diesel prices increased further as the conflict in the Middle East continued to disrupt global oil supplies. The cost of flying also jumped during the key month for summer getaways.

Inflation has moved further away from the Bank of England's 2% target.

The bank uses interest rates to control inflation.

The rate currently stands at 3.75% and the Bank of England is meeting on Thursday to decide whether to change it.

Image source, Getty Images

The Office for National Statistics (ONS) says transport, "particularly motor fuels", made the largest upward contribution to the monthly change in inflation.

Prices in the transport division rose by 4.6% in the 12 months to August 2026, up from 3.6% in July.

"The average price of petrol rose by 9.1 pence per litre between July and August 2026, compared with a rise of 0.3 pence per litre between July and August 2025," the ONS says.

Kevin Peachey
Cost of living correspondent

Today's figure is pretty much in line with expectations, but is a rise in the rate.

The increase would have been seen by drivers because it was partly the result of higher motoring costs, particularly fuel.

That was expected and reflects the effect at the pumps on international events.

We'll have more details on what the ONS says about fuel prices in the next post.

The rate of inflation rose to 3.1% in the year to August, according to the latest figures just released by the Office for National Statistics (ONS).

It marks a rise from 2.9% in July.

We'll bring you more in our next post.

Food inflation has so far defied predictions - but not for much longerpublished at 06:54 BST

06:54 BST

Emma Simpson
Business correspondent

The war in Iran sent forecasts for food prices soaring. But up until now, food inflation has defied predictions. It stood at 1.3% in July, the lowest rate since August 2024.

Intense competition in the supermarket aisles and the fact that many food businesses are still benefitting from longer term energy contracts have helped keep a lid on the rate of price rises.

But the pressures in the food supply chain haven't disappeared, they've merely been pushed back.

The latest forecast from IGD, the grocery industry research body, sees food inflation rising to as much as 6.6% next year, and remaining elevated into 2028.

One of the biggest risks, it says, is El Niño weather patterns affecting major food-producing regions.