Stories

Wed, 19 Aug 2026

Wed, 19 Aug 2026 Inflation is heating up but don't expect another crisis

Rising living costs could heap pressure on PM Andy Burnham though it depends what happens in the coming months.

* Energy bills rose last month due to the fallout from the war in Iran, but inflation was more muted than expected.
* Food prices have risen by a third over the past four years, but have recently stabilized at 1.3%, their lowest level in nearly five years.
* Wages and benefits have generally kept pace with inflation this year, but existing energy cost pressures may push up prices in food and other areas in coming months.
* Economists expect inflation to rise to around 3.5% later in the year, putting pressure on the new Prime Minister and Chancellor to provide more support.
* Energy bills are expected to rise by less than previously forecast, but could still reach over £1,000 by October.
* The Bank of England believes that inflation will come down to its 2% target in the medium term, and may not raise interest rates this year.
* However, there are risks that inflation accelerates or that the conflict in the Middle East drags on, pushing up energy prices and inflation.