Inflation soared in 2022 because oil and gas were in greater demand after the Covid pandemic, and energy prices surged again when Russia invaded Ukraine.
Before the war in the Middle East broke out, UK inflation had been expected to be at or around the target level of 2% over the next five years, according to the official forecasts published in March 2026.
But in April, the Bank of England warned that disruption to global energy markets could push UK inflation as high as 6% in the worst-case scenario.
When the latest ceasefire took effect, analysts said it could limit further inflation hikes. Oil prices initially fell sharply after the deal was announced, but have risen again since the US and Iran resumed attacks in the Strait of Hormuz in July.
As a result, UK petrol prices are likely to climb back up. This – coupled with the 4% increase in household energy bills from 1 October when the latest Ofgem price cap took effect – is expected to push UK inflation higher.
As part of his pledge to provide “breathing space” for households struggling with the cost of living, Prime Minister Andy Burnham scrapped VAT on household electricity bills in October. It is predicted to have a small downward impact on inflation.
Precisely because food and energy prices can be very volatile, the Bank of England also considers other economic measures such as “core inflation”, which excludes these costs.
Core CPI was 2.8% in the 12 months to September 2026, up from 2.6% in the 12 months to August.
