Inflation rises again to 3.1% in year to August as Iran war continues to push up cost of living

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The official data comes amid warnings from economists that inflation will continue to swing higher over the coming months, with increases in interest rates also predicted.

Households are also expected to face another rise in their energy bills from next month, adding to pressure on consumer finances ahead of the autumn Budget.

Chancellor John Healey stressed that the UK economy is nonetheless “proving resilient” as he blamed the war in Middle East for the inflation increase.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation increased to 3.1% in August, compared with 2.9% in July.

The figures point towards a continued upwards trajectory for inflation since reaching a 15-month low of 2.6% in June.

It comes as higher fuel costs linked to the conflict in the Middle East and more expensive electronics push up the cost of living.

Motor fuels contributed significantly to the rise in inflation, after the average price of petrol rose by 9.1 pence per litre between July and August

.ONS chief economist Grant Fitzner said: “Sharp price rises for petrol and diesel pushed inflation up again in August.

“Higher airfares, particularly for long-haul journeys, also contributed to the increase.”

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.ONS chief economist Grant Fitzner said: “Sharp price rises for petrol and diesel pushed inflation up again in August.

“Higher airfares, particularly for long-haul journeys, also contributed to the increase.”

Responding to the latest official data showing inflation rose to 3.1% in August, the Chancellor said: “The war in the Middle East is impacting on inflation worldwide, not just here at home.“In our bills, our weekly shop and at the petrol pumps

"We have taken early action to help families and 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 and growth in every postcode continues.”

Economists had suggested that the fresh figures were likely to show the early impact of the breakdown of the US-Iran ceasefire.

Oil and gas prices have ticked higher since the US-Iran ceasefire deal collapsed on July 8.

Oxford Economics’ Andrew Goodwin said he expected the data to show a significant uplift linked to higher petrol and diesel costs for motorists.

“Weekly data from the Department for Energy Security and Net Zero suggests that fuel prices rose 7% month-on-month between July and August, and we expect this to add around 0.2 percentage points to CPI inflation,” he said.

Experts at Pantheon Macroeconomics also suggested that so-called “AI-flation” could also be a factor.Rob Wood, chief UK economist for the company, said they believe higher electronics prices, linked to chip shortages amid the AI boom, could add 0.2 percentage points to inflation.

Analysts at Deutsche Bank said: “After broadly matching expectations in July, we see price momentum pushing up again in August.“Some goods inflation, food inflation and a chunky rise in energy prices will likely see inflation take another small step higher to round up the summer.”

The banking giant predicted that CPI will peak at around 3.5% year-on-year in November as further price pressures, such as another rise in household energy bills in October, come into effect.

Projections for rising inflation have contributed to heightened expectations that the Bank of England could increase interest rates in the coming months.