LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to increasing household energy costs. The Consumer Prices Index rose by 2.9% compared to the previous year, up from 2.6% in June. This marked the first annual increase since March. Month-on-month, prices went up by 0.3% from June, contrasting with a 0.1% rise in July 2025. The Office for National Statistics announced these data on August 19.
The broader CPIH measure experienced a 3.1% yearly increase in July, accelerating from 2.8% in June. In July, CPIH also grew by 0.3%, after remaining relatively flat in July 2025. This measure incorporates owner occupier housing costs and Council Tax, which are not included in the standard CPI. The largest upward contribution to the annual inflation rate came from housing and household services, while transport provided the most significant offset to the overall increase.
Inflation for housing and household services rose to 4.1% in July from 2.7% in June. Gas prices surged 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 the energy price cap by 13% for July through September. For a typical dual-fuel household paying via direct debit, the cap translated to an annual cost of £1,862, an increase of £221.
Energy expenses fuel inflationary pressures
Prices for furniture and household goods rose 1.0% compared to the previous year after a 0.2% decline in June. In that category, prices fell 0.4% during July, compared with a 1.6% decrease in July 2025. This was the smallest July decrease for that category since 1989. Inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, marking its lowest annual rate since September 2021.
Transport inflation decreased to 3.6% in July from 5.7% in June, helping to temper the overall inflation figure. Diesel prices dropped 8.8 pence per litre to an average of 167.6 pence, while petrol prices decreased 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 to a 30.2% rise during the same period in 2025.
Core inflation stabilizes as services inflation moderates
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 slowed slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. During its July meeting, the Monetary Policy Committee maintained the Bank Rate at 3.75%, with six members voting to keep the rate unchanged and three supporting a quarter-point hike.
These July figures indicate that headline CPI inflation is 0.9 percentage points above the Bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH moved up slightly to 2.9% from 2.8%. Housing and household services remained the biggest contributors to CPIH inflation for the 25th consecutive month. Food’s impact on inflation lessened, while slower transport inflation somewhat offset the effect of higher household energy costs. The next official consumer price update, covering August 2026, is scheduled for September 16.
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