UK CPI September 2026: headline holds at 3.0% as services stay sticky

Q: How does UK CPI differ from CPIH and RPI?

The ONS publishes three main price measures. CPI is the Bank of England's inflation target measure — it covers consumer prices but excludes owner-occupier housing costs. CPIH adds an estimate of owner-occupier housing costs (based on rental equivalence), making it broader and generally 0.3–0.5 pp higher during periods of rising housing costs. RPI is an older index no longer classified as a national statistic — it uses a different formula (arithmetic rather than geometric mean) that tends to produce higher readings, and it includes mortgage interest payments directly. RPI matters for index-linked gilts and some rail fare calculations.

The Office for National Statistics reported that UK CPI rose 3.0% in the 12 months to September 2026, unchanged from August and in line with the consensus forecast. The standout feature of the release is the yawning divergence between goods and services: goods prices are now falling at an accelerating pace while services prices remain stubbornly elevated — a split that is keeping the Bank of England cautious about the pace of rate cuts. Explore the full UK inflation history on our inflation explorer.

Services: the 5.6% problem

Services CPI held at 5.6% for the second consecutive month, defying expectations of a gradual decline. Within services, the main upward contributors were:

Restaurants and hotels: +7.4% YoY — driven by staff wage growth, which remains elevated at 5–6% in hospitality.
Recreation and culture: +5.1% YoY — including rising prices for package holidays, cultural events, and streaming subscriptions.
Rents: +6.8% YoY — new rental listings in London and major cities are up 8–10% YoY, and the ONS rental series is still catching up.
Transport services: +5.3% YoY — rail fares up following the January 2026 regulated fare increase.

The Bank of England's MPC watches services CPI more closely than headline. Governor Bailey has indicated that sustained progress toward the 2% target requires services CPI to fall toward 3.5–4%. At 5.6%, the current reading is inconsistent with a rapid easing cycle.

Goods: deflationary pressure deepening

Goods CPI fell to −0.6% — the sharpest goods deflation since October 2020. The main downward contributors were clothing and footwear (−2.1% YoY, larger seasonal discounting), furniture and household goods (−1.8% YoY), and used cars (−5.2% YoY as the used car market continues to normalise post-pandemic). Energy remains a downward drag: petrol prices were down 7% year-on-year in September, reflecting lower global oil prices and the base effect from elevated fuel prices in autumn 2025.

Core and food: encouraging trends

Core CPI eased to 3.8% — the lowest reading since March 2022 and a meaningful decline from the 6.3% peak in May 2023. This is the most important disinflation signal in the report: it shows that the underlying price pressures, beyond energy and food volatility, are gradually unwinding. Food CPI continued its descent to 3.1%, a remarkable turnaround from the 19% peak in March 2023. UK food disinflation has been faster than expected, led by falling global food commodity prices, lower shipping costs, and intense competition among UK supermarkets.

CPIH and RPI for context

CPIH (which includes owner-occupier housing costs) rose 3.4%, slightly above CPI, reflecting rising owner-occupier costs driven by higher mortgage rates feeding into OOH costs. RPI — an older measure no longer designated as a national statistic — rose 4.1%, still significantly above CPI because of its different formula effect and higher mortgage cost weight. These measures are relevant for wage negotiations and index-linked gilts. The January 2027 UK CPI release captured the next major development.

Bank of England implications

The September data reinforces a nuanced picture for the MPC. Progress on core inflation is real and encouraging. But services inflation at 5.6% means the BoE cannot declare victory. Markets are pricing approximately two more 25bp cuts before end-2026 (November and February), with services CPI the primary gating condition for acceleration. Our Bank of England November 2026 event page covers the upcoming decision in detail.

Frequently asked questions

Why is UK services inflation so much higher than goods inflation?

Services prices are primarily driven by labour costs — the dominant input for hospitality, retail, healthcare, and professional services. UK wage growth has been running at 5–6% in 2026, reflecting the tight post-pandemic labour market. Goods prices, by contrast, are heavily influenced by global supply chains, commodity prices, and shipping costs — all of which have normalised sharply since 2022. This divergence is not unique to the UK: the same goods-deflation/services-stickiness pattern appears in the US and the euro area, though it is especially pronounced in the UK where wage growth has been stronger.

How does UK CPI differ from CPIH and RPI?

The ONS publishes three main price measures. CPI is the Bank of England's inflation target measure — it covers consumer prices but excludes owner-occupier housing costs. CPIH adds an estimate of owner-occupier housing costs (based on rental equivalence), making it broader and generally 0.3–0.5 pp higher during periods of rising housing costs. RPI is an older index no longer classified as a national statistic — it uses a different formula (arithmetic rather than geometric mean) that tends to produce higher readings, and it includes mortgage interest payments directly. RPI matters for index-linked gilts and some rail fare calculations.

What is the Bank of England's inflation target and how is it measured?

The Bank of England targets CPI inflation at 2% per year, as defined by the Bank of England Act 1998 and subsequent remit letters from the Chancellor. The target is symmetric — the BoE is equally concerned about inflation persistently below 2% as above it. When CPI deviates more than 1 percentage point from target in either direction, the Governor must write an open letter to the Chancellor explaining why. With CPI at 3.0% in September 2026, the BoE remains in open-letter territory. The inflation target term explains the broader framework across central banks.