LONDON / RankWire.AI / – UK inflation reached its highest point since March during July, primarily driven by increased household energy costs. The Consumer Prices Index climbed 2.9% compared to the same month last year, up from 2.6% in June. This marked the first rise in the annual inflation rate since March. Month-on-month, prices grew by 0.3%, contrasting with a 0.1% increase in July 2025. The Office for National Statistics published the data on August 19.
The broader CPIH measure experienced a 3.1% annual increase in July, accelerating from 2.8% in June. During the same period, CPIH also advanced by 0.3%, after remaining relatively stable in July 2025. This measure includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The main contributors to the rise in annual inflation were housing and household services, while transport provided the largest offset to the overall increase.
Inflation in housing and household services jumped 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 costs increased by 3.6%, reversing a 3.8% decrease a year earlier. Ofgem raised its energy price cap by 13% for the period from July through September. For a typical dual-fuel household paying via direct debit, this cap equated to an annual cost of £1,862, an increase of £221.
Rising energy costs fuel inflationary pressures
Furniture and household goods saw prices 1.0% higher than last year after a decline of 0.2% in June. In July, prices in this category fell by 0.4%, compared with a 1.6% decrease in July 2025. This was the smallest July decline for the category since 1989. Meanwhile, inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, reaching its lowest annual rate since September 2021.
Transport inflation decelerated to 3.6% in July from 5.7% in June, helping to temper the overall inflation figure. Diesel prices decreased by 8.8 pence per litre during the month to an average of 167.6 pence. Petrol prices also fell by 3.1 pence per litre to 152.2 pence. Annual inflation 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 in the same period in 2025.
Core inflation stabilizes as services growth slows
Core CPI inflation remained steady 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 eased slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. At its July meeting, the Monetary Policy Committee held the Bank Rate at 3.75%, with six members voting to keep the rate steady and three supporting a quarter-point increase.
The July inflation figures place headline CPI inflation 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, while core CPIH edged up to 2.9% from 2.8%. For the 25th consecutive month, housing and household services contributed the most to CPIH inflation. Food contributed less to overall inflation, while slower transport inflation helped offset higher household energy costs. The next official consumer inflation report, covering August 2026, is scheduled for release on September 16.
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