UK Inflation Soars to 3.1%

UK inflation rose to 3. 1% in the year to August, driven by higher petrol and diesel prices.

Inflation is widely expected to rise again in the coming months due to ongoing supply chain disruptions and energy price increases.

The Bank of England looks closely at the inflation figures when deciding whether to increase, lower or hold its base interest rate, currently 3. 75%.

Higher fuel prices are causing higher food prices, which remain at 1. 3%. However, it may take a year for changes in food costs to filter through to the shop floor due to supply chain disruptions.

The Bank of England has indicated it could raise interest rates if oil prices do not start to fall, with up to six rate hikes in a worst-case scenario.

The inflation rate for countries using the euro was 3. 3% in August, according to EU data, external - up from 2. 9% in July.

The Bank of England has also raised interest rates twice in recent months to 2. 5%. US inflation was in 3. 4% in August, the same as in July, with prices there also affected by higher fuel costs.

President Donald Trump has made it clear he expects new Fed chair Kevin Warsh to cut rates more aggressively than his predecessor Jerome Powell.

The Federal Reserve is set to make its latest announcement on interest rates later on Wednesday.

UK petrol prices are likely to climb back up due to the increase in household energy bills from 1 July when the new Ofgem price cap took effect. This - coupled with the increase in household energy bills - is expected to push UK inflation higher.

Higher fuel prices are causing higher food prices, which remain at 1.