Inflation rises to 3.1% in August as fuel prices climb
CPI rose to 3.1% in August from 2.9%, with motor fuel the biggest driver. What it means for savings rates and next year's State Pension
UK inflation rose to 3.1% in the year to August 2026, up from 2.9% in July, according to the Office for National Statistics. Transport, and motor fuel in particular, was the biggest driver as higher oil prices reached the forecourt. CPIH, which includes owner-occupier housing costs, was 3.3%. The figures land the day before the Bank of England's rate decision and make a cut less likely.
What pushed prices up
Oil and gas prices have risen through the summer because of the conflict in the Middle East. Petrol and diesel respond fastest, so the transport category led the rise. The Energy Price Cap increase due in October, driven by gas, will feed into the autumn figures too.
Inflation at 3.1% means prices overall are rising at roughly the pace they were at the start of the year. It is well below the peaks of 2022 and 2023, but it is moving in the wrong direction for the Bank of England, which targets 2%.
Savings: are you beating inflation
The test for any savings account is whether the rate after tax beats 3.1%. The best easy-access accounts pay around 4.5% to 5%, and fixed-rate bonds around 4.5% to 5.25%, so it is possible to stay ahead. Many of the top easy-access rates include a 12-month bonus, so check the underlying rate.
Basic-rate taxpayers can earn £1,000 of interest tax-free under the Personal Savings Allowance, higher-rate taxpayers £500. Above that, tax eats into the real return. Cash ISAs and Premium Bonds are tax-free, which matters more when both rates and inflation are above 3%.
Anything still in an account paying 2% or less is losing value in real terms.
What it means for you
The triple lock uses September's inflation figure, not August's, along with earnings growth and a 2.5% floor. Whichever of the three is highest sets the State Pension rise for April 2027. With inflation at 3.1% and earnings growth also running above 2.5%, forecasts already point to a full new State Pension of around £13,000 a year from April 2027. That would take it above the frozen £12,570 Personal Allowance.
For everyone else, higher inflation makes a November base rate rise more likely. That is good for savers, less good for anyone remortgaging.
Information only, not personal advice.