CPI inflation rises to 3.5%

CPI inflation rises to 3.5%

21 Oct 2026

Josh Pilley, Head of Multi-Asset Research at XPS Group, commented:

“Today's inflation data showed that the UK CPI rose from 3.1% in August to 3.5% in September, broadly matching market expectations.

Higher energy prices remained a key contributor to inflation, with September’s sharp rise in oil prices increasing fuel costs for motorists and transport costs for businesses. With geopolitical tensions showing no sign of abating and Ofgem’s energy price cap rising a further 4% on 1 October, inflationary pressures are likely to persist through the remainder of the year.

Inflation pressures have contributed to rising UK government borrowing costs, with the 20-year nominal gilt yield breaching 6% for the first time since 1998. Elevated yields add to the fiscal pressures facing the Chancellor ahead of the Autumn Budget.

Despite inflationary headwinds, most defined benefit scheme funding levels continue to benefit from higher nominal gilt yields and strong equity markets. XPS’s DB:UK analysis shows the aggregate UK DB pension scheme surplus exceeded £240 billion as at 12 October 2026, helping to fuel the debate around whether schemes should continue to run on to release surplus.”