LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily influenced by rising household energy costs. The Consumer Prices Index climbed by 2.9% compared to the previous year, up from 2.6% in June. This marked the first increase in the annual inflation rate since March. On a monthly basis, prices also grew by 0.3%, compared to a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
In July, the broader CPIH measure advanced 3.1% year-on-year, a rise from 2.8% in June. CPIH also increased by 0.3% during the month, after little change was observed in July 2025. This index incorporates owner-occupier housing costs and Council Tax, which the standard CPI excludes. The main contributions to the rise in annual inflation came from housing and household services, while transport provided the most significant 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 14.7% during July, following a 7.2% decline in the same month last year. Electricity costs also rose by 3.6%, reversing a 3.8% decrease a year earlier. Ofgem increased its energy price cap by 13% for July through September. For a typical dual-fuel household paying via direct debit, the cap now stands at £1,862 annually, representing an increase of £221.
Energy price rises contribute to inflation surge
Prices for furniture and household goods increased by 1.0% compared to the previous year after a 0.2% decline in June. During 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. Inflation for clothing and footwear rose 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 eased to 3.6% in July from 5.7% in June, helping to temper the overall price increase. Diesel prices declined by 8.8 pence per litre in July to an average of 167.6 pence, while petrol prices dropped by 3.1 pence to 152.2 pence. The annual inflation rate for motor fuels decreased 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 steady as services sector growth slows
Core CPI inflation remained at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased from 1.7% to 2.2%, while services inflation eased slightly from 3.6% to 3.4%. The Bank of England continues to target a 2% inflation rate. During its July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to maintain the rate and three supporting a quarter-point hike.
The July statistics show headline CPI inflation is 0.9 percentage points above the Bank’s target. CPIH services inflation remained at 3.6%, while core CPIH edged higher from 2.8% to 2.9%. For the 25th consecutive month, housing and household services were the largest contributors to CPIH inflation. Food had a smaller impact on overall inflation, with slower transport inflation partially offsetting higher energy costs. The next official release of consumer inflation data, covering August 2026, is scheduled for September 16.