The Office for National Statistics confirmed on 21st October that the consumer prices index rose by 3.5% in the 12 months to September. The reading came in above both the 3.1% recorded for August and the 3.4% that economists had expected. It is the fastest pace of price growth in nearly a year, and it has arrived with the Chancellor’s first Budget set for Wednesday 28th October.

Transport costs provided the largest upward contribution. The annual increase in motor fuels was the steepest since August 2022, diesel has pushed above £2 a litre for the first time, and petrol now averages more than £2 across the forecourts. Restaurants and hotels provided the largest offsetting downward contribution, softening the overall rise without holding the headline figure in check.

What the figures reveal about the path of prices

Fuels set the pace

The pressure at the pump reflects firmer conditions in the global energy market, with Brent crude trading comfortably above £75 a barrel in recent months. Higher oil prices feed through to haulage, aviation and commuting costs, so the effect reaches well beyond the domestic motorist. September’s reading is the clearest evidence yet that energy markets are once again shaping the inflation story. For households and businesses alike, fuel has become the line item that no longer responds to ordinary budget discipline.

Why the core reading matters

Core inflation, which strips out energy, food, alcohol and tobacco, rose to 2.8% from 2.6% in August. The acceleration points to price pressure that extends beyond the forecourt and into the wider economy. For the Bank of England, whose target stands at 2%, the direction of travel matters as much as the headline figure. The core reading suggests domestic price pressure is building rather than fading, which complicates any argument for early rate relief.

The investment response to a firmer price backdrop

Positioning portfolios for price pressure

For investors, the data strengthens the case for assets that tend to keep pace with rising prices. Index-linked gilts, infrastructure holdings and companies with genuine pricing power all improve the odds of preserving real returns. Cash is finally earning something, yet with inflation at 3.5% its real value still erodes for anyone parking money for long. Salaried executives with concentrated share positions may also want to revisit when they plan to sell, because a higher interest rate environment changes the relative appeal of every asset class on the list.

A steadier tax picture for disposals

One planning pressure has actually eased. Chancellor John Healey has rejected calls from within his party to raise capital gains tax in next week’s Budget, citing warnings that higher rates could encourage wealthy individuals to leave the country or defer selling assets. HMRC analysis suggested that increasing the higher rate by 10% would reduce Treasury receipts by £3.6 billion in 2028-9 rather than raise them. The Chancellor has framed the decision in strikingly commercial terms, saying he wants ‘this country as a country of wealth creation’.

Capital gains tax currently stands at 18% for basic rate taxpayers and 24% for higher and additional rate payers on most assets. That stability gives investors and business owners a clearer window for planning disposals across the remainder of the tax year. Combined with an expected rise in interest rates, it shifts the planning question towards timing rather than avoidance. Executives weighing share sales or property transactions can now model outcomes with a reasonable degree of confidence about the rates that will apply.

Business leaders plan for dearer money

Budgeting for borrowing costs

The Bank of England is widely expected to raise interest rates when its committee meets next month, and some forecasters warn inflation could climb above 4% next year. Companies carrying floating rate debt will feel each quarter’s decision directly, so finance teams are reworking assumptions that were built for a gentler rate cycle. Capital projects with thin margins may need renegotiated terms or phased delivery. The executive agenda for the next two quarters is straightforward: stress test the balance sheet before the Bank acts rather than after.

The fiscal backdrop tightens

The public finances add a further layer of constraint. Government borrowing reached £24.5 billion in September, up from £17 billion in August and £1.9 billion above official forecasts, while debt interest payments hit £10.9 billion, the highest September total since records began. Total public debt has passed £3 trillion for the first time, equivalent to about 94% of annual economic output. That leaves limited room for generosity next Wednesday, and business planners should assume the tax system will stay tight even where individual rates hold steady.

None of this amounts to a crisis, but it does amount to a moment. Households and firms that revisit budgets, debt structures and investment allocations now will find the exercise considerably cheaper than doing so after the next move in rates. The numbers published on 21st October give the clearest signal yet of the conditions the Budget will have to meet.