LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to increased household energy costs. The Consumer Prices Index grew by 2.9% compared to the same month last year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices rose 0.3% from June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure experienced a 3.1% annual rise in July, up from 2.8% in June. During the month, CPIH increased by 0.3%, after showing minimal change in July 2025. This measure includes owner occupier housing costs and Council Tax, which are not part of the standard CPI calculation. The primary contributors to the change in annual inflation were housing and household services, while transport provided the largest offset to the overall increase.
Inflation in housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% during July, following a 7.2% decline in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decrease a year earlier. Ofgem’s energy price cap was raised by 13% for July through September. For a typical dual-fuel household paying by direct debit, this cap equated to £1,862 annually, a rise of £221.
Energy expenses push inflation upward
Prices for furniture and household goods increased by 1.0% compared to last year after a 0.2% decrease in June. In that category, prices fell 0.4% during July, compared with a 1.6% decline in July 2025. This was the smallest July decrease for the category since 1989. Meanwhile, inflation for clothing and footwear rose to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to limit the overall headline increase. Diesel prices decreased by 8.8 pence per litre during the month to an average of 167.6 pence. Petrol prices fell by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels eased to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, compared with a 30.2% rise during the same period in 2025.
Core inflation remains steady as services inflation eases
Core CPI inflation stayed at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation slowed slightly to 3.4% from 3.6%. The Bank of England continues to aim for a 2% inflation target. Its Monetary Policy Committee maintained the Bank Rate at 3.75% during its July meeting, with six members voting to hold the rate and three supporting a quarter-point increase.
The July data shows headline CPI inflation was 0.9 percentage points above the Bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH edged up to 2.9% from 2.8%. Housing and household services contributed the most to CPIH inflation for the 25th consecutive month. Food contributed less to overall inflation, while slower transport inflation partly offset the impact of rising household energy prices. The next official consumer inflation report, covering August 2026, is scheduled for release on September 16, providing further insights into recent price movements.