JPMorgan has called the latest jump in UK consumer prices a UK inflation warning shot for what could follow, after official data showed the headline rate climbing to 2.9% in September 2025, its highest level since October 2023.
According to the Office for National Statistics (ONS) consumer price inflation bulletin, the CPI all-goods index reached 2.9% in the 12 months to September 2025, up from 2.8% in August. Services inflation, meanwhile, held steady at 4.7%.
The driver is no mystery: higher household energy bills following the Ofgem price cap increase. Most other components were little changed, and food price inflation actually fell again in September, lending no credibility to claims of supermarket price-gouging.
The UK Inflation Warning Shot JPMorgan Is Watching
The bank’s concern is not what September’s number says about now, but what it signals about the months ahead. Pipeline pressures have not fully fed through. The next question is whether wage-setters and businesses treat this as a one-off or embed it into their expectations.
Julian Jessop, economics fellow at the Institute of Economic Affairs, takes a more sanguine view. ‘Market forces are helping to keep inflation in check, despite the headline rate jumping to 2.9%,’ he said. ‘As expected, the bulk of the rise was driven by higher household energy bills following the increase in the Ofgem cap. Most other components were little changed, while food price inflation fell again, providing little support for claims that supermarket “price gouging” is driving up grocery bills.’
Jessop acknowledges the uncertainty ahead. ‘It is still too soon to sound the “all clear”. Inflation could rise further in the coming months as pipeline pressures feed through, and may not return to the Bank of England’s 2 per cent target until late next year.’
My read is that Jessop has the better of the immediate argument. Core CPI, which strips out energy, food, alcohol and tobacco, eased to 3.5% in the 12 months to September 2025, down from 3.6% in August, per the same ONS bulletin. That is the direction of travel you want if you are a rate-setter. The energy-driven headline spike looks uncomfortably like noise contaminating the signal.
Labour Market Weakness Changes the Calculation
The energy story has a sequel worth watching. Ofgem has set the price cap for the July to September 2026 quarter at £1,862 per year for a typical household, a 13% increase on the previous period, with gas unit rates rising from 5.74p per kWh to 7.33p per kWh. That cap period is downstream from the one that drove September’s print, but it illustrates how energy costs remain an active upward force on CPI, not an episode that has passed.
Against that backdrop, the labour market data provides the counterweight that should keep the Bank of England from overreacting. The ONS labour market overview for March 2026 shows payrolled employees fell by 96,000, or 0.3%, between January 2025 and January 2026. Over the comparable November 2025 to January 2026 period, the decline was 109,000, or 0.4%. Subdued employment typically softens wage demands, which is precisely the second-round effect the Bank fears most.
Jessop’s conclusion is that ‘subdued demand, strong competition and yesterday’s weak labour market data should reassure the Bank that the risks of second round effects are limited.’ That framing seems right, for now. Second-round effects are a risk to monitor, not yet a reality to price in.
Context matters here, too. As BBC News points out, 2.9% remains far below the 11.1% peak reached in October 2022, the highest rate in 40 years, when gas and oil prices surged following Russia’s full-scale invasion of Ukraine. The structural situation is better. The cyclical one requires more care.
JPMorgan’s warning is not wrong. If energy stays elevated and the labour market stabilises without wage moderation, the second-round risk Jessop currently dismisses could become a live problem. The next two CPI prints will either validate the bank’s caution or undermine it. Watch October’s data closely.
