UK September 2026 inflation rises to 3.5% as public sector debt passes £3tn

UK consumer prices index (CPI) inflation rose to 3.5% in September 2026 from 3.1% in August. Public sector net debt passed £3 trillion (£3tn) for the first time, days before the October 28 Budget.

A data update from FactIQ, written from UK official statistics (ONS, Bank of England, DEFRA, HMRC, DBT, and DfT) figures. What is FactIQ?

Inflation rose because prices went up this month

The consumer prices index (CPI) tracks the prices households pay for goods and services. Its annual rate rose to 3.5% in September, from 3.1% in August, 2.9% in July and a low of 2.6% in June. The index rose 0.3% on the month to 144.1. In September 2025 it did not change. So the higher annual rate comes from price rises this month, not from a weak month a year earlier dropping out of the comparison.

Core CPI, which leaves out energy, food, alcohol and tobacco, rose to 2.8% from 2.6%. It had stayed at 2.5–2.6% for four months.
CPIH, which adds owner-occupiers' housing costs to CPI, rose to 3.6% from 3.3%.
The retail prices index (RPI), an older inflation measure, rose to 3.9% from 3.4%.

Borrowing rose in September and debt went above £3 trillion

Public sector net borrowing is the gap between what the government spends and what it takes in. It was £24.5 billion (£24.5bn) in September, against £22.8bn a year earlier. Public sector net debt reached £3,005.0bn. That is 94.0% of gross domestic product (GDP), the total value of the economy's output, up from 93.6% in August.

Earlier months were revised down

August borrowing was revised from £18.3bn to £17.3bn. July was revised from £2.0bn to £0.4bn. This puts borrowing for April–September at about £97.8bn, below the roughly £102.3bn of the same period last year.

Markets expect the Bank of England to raise interest rates

Bank Rate, the Bank of England's main interest rate, is still 3.75%. The sterling overnight index average (SONIA), the rate banks pay to borrow overnight, is about 3.73%. The September inflation figures make a November rate rise more likely. It would be the first in more than three years.

The 10-year government bond (gilt) yield was 5.37% on October 19, up from about 4.97% in late July. The 5-year yield was 4.97% and the 20-year yield was 5.71%.
Sterling was at $1.3387 on October 20, up from $1.316 on October 14. The sterling effective exchange rate index, which measures the pound against a basket of currencies, was 86.0.

Source: UK official statistics (ONS, Bank of England, DEFRA, HMRC, DBT, and DfT). See all UK data in FactIQ.

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