Aberdeen: Rise in services inflation particularly concerning

Aberdeen: Rise in services inflation particularly concerning

October 21, 2026

Inflation UK

Felix Feather, Economist at Aberdeen Investments, comments on the UK inflation figures released today:

'The UK’s headline inflation rate jumped from 3.1% to 3.5% in September, locking in a Bank of England hike in November. Fuel prices were the most important factor driving the increase. But, importantly, core inflation also picked up from 2.6% to 2.8%.

The rise in services inflation from 3.4% to 3.7% is particularly concerning, as it mostly reflects domestic factors rather than the cost of imports. And the rise of inflation isn’t done yet. We expect the headline rate to peak over 4% in Q1 2027 after the cap on household energy bills is lifted by around 25%. That should prompt a further BoE hike in February next year.'

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