Inflation is expected to increase to its highest level for 21 months as more pressure piles on the Chancellor and the Bank of England.

Economists have predicted that Consumer Prices Index (CPI) inflation will have hit 4% in September, when the Office for National Statistics (ONS) reveals its latest data on Wednesday.

It would mark the highest level since January 2024.

Inflation struck 3.8% in July and August amid pressure from rising food prices, as firms highlighted increased tax and labour costs.

Economists at Pantheon Macroeconomics predicted that higher motor fuel and air fare prices would help drive inflation to 4% in September.

It also pointed towards “strong clothes prices” for the month, but indicated this could be offset by “slightly softer” services price inflation.

Economists have also suggested there could be a contribution from increased private school fees.

Some schools were expected to increase fees from the start of the new school year as they staggered higher costs for parents after the Government introduced a 20% VAT rate for private school fees at the start of the year.

September’s predicted jump in inflation could represent a peak in the rising cost of living for UK households.

The Bank of England previously forecast that inflation would peak at around 4% in September before steadily falling.

Pantheon Macroeconomics’ Rob Wood has said he expects inflation to “slow only slightly” in the following months, dipping to 3.8% by the end of the year.

Other economists have been more optimistic, with Investec suggesting it expects the rate to have peaked at 3.9% in September before falling.

Any increase would still highlight a challenging economic backdrop for the Bank of England as it seeks to bring inflation down to its 2% target rate.

On Friday, the Bank’s top economist Huw Pill urged other rate-setters to be “more cautious” about future cuts due to concerns that inflation could stay stubbornly high.

Another rise in inflation could also be a major concern for Chancellor Rachel Reeves, a month ahead of her autumn Budget.

The September inflation rate is typically used to decide the level of increase for many benefits, such as universal credit, tax credits and disability benefits.

This rate is also a key part of the Pension Triple Lock, which is used to decide how much pensions will increase by in the following April.

However, the increase is based on either this inflation rate, average earnings growth between May and July, or 2.5%.

Given earnings growth was confirmed as 4.8%, the inflation rate will only be used if there is a shock acceleration beyond this level.

A rise in inflation in September could result in higher-than-expected spending when the Chancellor is already looking to fill a black hole in the state finances.

However, higher inflation would also contribute to a higher tax take, with the September rate also typically used to calculate some annual tax increases such as for business rates.

Finance Minister Senator Muhammad Aurangzeb met with Turkey’s Minister of Treasury and Finance, Mehmet Şimşek, in Washington, DC, where both sides acknowledged the ongoing high-level engagements between the leadership of Pakistan and Turkey.

During his visit to the United States, the two ministers reaffirmed their shared commitment to further strengthening the longstanding brotherly relations between the two countries.

Finance Minister Aurangzeb briefed his Turkish counterpart on Pakistan’s ongoing economic reforms, highlighting initiatives in areas such as tax policy, energy, state-owned enterprises, privatization, and public finance.

He also shared details about the Federal Board of Revenue’s (FBR) reform journey, which was recently presented at a World Bank event, and Pakistan’s efforts to improve its tax-to-GDP ratio.

Aurangzeb discussed the country’s progress in integrating data across government departments to enhance financial management, transparency, and accountability.

Separately, the Finance Minister held a meeting with International Finance Corporation (IFC) Managing Director Makhtar Diop.

He expressed gratitude to the IFC for designating Pakistan as a regional hub under its recent organizational restructuring, describing the recognition as a reflection of growing global confidence in Pakistan’s economy.

Aurangzeb also briefed Makhtar Diop on developments in the Reko Diq mining project and expressed hope that the EXIM Bank would soon join the venture.

He appreciated IFC’s support in financial inclusion and digital payment rights projects at the grassroots level.

Furthermore, he acknowledged IFC’s advisory contributions in the sectors of pharmaceuticals, electric vehicles, and commodity exchanges.

The minister welcomed the IFC Managing Director’s plan to visit Pakistan during the upcoming Spring Meetings.

On this occasion, both Aurangzeb and Makhtar Diop also participated in a signing ceremony for a swap agreement between the State Bank of Pakistan and the IFC.

High gold and silver prices had little effect on festive shopping this Dhanteras, with sales matching last year’s volumes and rising by more than 25% in value.Shoppers across the country flocked to stores to buy coins and lightweight jewellery, driven by hopes that prices will keep climbing.

Industry executives said gold and silver coins were the top choice for many buyers this year as people saw them as a smart investment and a way to avoid the higher making charges on jewellery. Ten-gram, 24-carat gold coins, priced at around Rs 1.40 lakh each, were especially popular, according to ET.Jewellery sales were led by lightweight pieces in 22- and 18-carat gold, while younger customers opted for more affordable 9- and 14-carat options.Surendra Mehta, national secretary of India Bullion & Jewellers Association said, “There was a good rush, with queues in Mumbai’s Zaveri Bazar to buy gold and silver coins. The trend from Saturday morning indicates trade will be able to achieve gold volumes of the previous Dhanteras.”Many shoppers had earlier postponed purchases, expecting prices to fall. But with no sign of a correction and indicators pointing to new highs, demand surged. “Now that there is no sign of a correction in prices and all economic indicators are pointing towards fresh highs, people have come out to purchase gold,” Colin Shah, managing director, Kama Jewelry, told ET.Jewellers also noticed growing interest from investors. “Despite record high gold prices, we are witnessing renewed enthusiasm this festive season. Consumers are viewing price volatility as a strategic opportunity to reinvest — whether through gold coins or by upgrading jewellery,” said Ajoy Chawla, CEO of Tanishq.Last year, India sold 39 tonnes of gold on Dhanteras. This year, the Muhurat spans two days, 18 and 19 October. Gold and silver were sold at Friday’s closing prices of Rs 1,34,800 per 10 gm and Rs 1,74,306 per kg, respectively, plus 3% GST, ET reported.Prices have risen sharply over the past year, with gold up 65% and silver up 81% since the last Dhanteras. Retailers in many areas even ran short of coins as demand exceeded expectations. “The trend shows that we will surpass last year Dhanteras sales both by volume and value,” said Baby George, CEO of Joyalukkas.Southern India, which accounts for over 40% of the country’s annual gold consumption of 800–850 tonnes, remained the largest market. But strong coin demand was seen across the country, showing how consumers are adapting their buying patterns in response to price trends.