LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily driven by increased household energy expenses. The Consumer Prices Index climbed 2.9% compared to the same month last year, up from 2.6% in June, marking the first annual increase since March. Additionally, prices grew by 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 saw a 3.1% yearly increase in July, accelerating from 2.8% in June. During the same period, CPIH advanced by 0.3% after showing minimal change in July 2025. This measure includes owner-occupier housing costs and Council Tax, which are excluded from the standard CPI. The largest upward contribution to the annual inflation rate came from housing and household services, whereas transport provided the most significant offset against the overall increase.
In July, inflation for housing and household services rose to 4.1% from 2.7% in June. Gas prices surged by 14.7% during July, after a 7.2% decrease in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decline from the previous year. Ofgem’s energy price cap was raised by 13% for July through September, and for a typical dual-fuel household paying via direct debit, the cap equated to £1,862 annually, an increase of £221.
Energy expenses push inflation upward
Prices for furniture and household goods were 1.0% higher than a year earlier after a 0.2% decrease in June. In July, prices in this category fell by 0.4%, compared to a 1.6% decline in July 2025, marking the smallest July decline for the category since 1989. Meanwhile, inflation in clothing and footwear rose to 0.5% from a negative 0.5%. Food and non-alcoholic beverage prices increased at a slower pace, reaching 1.3%, their lowest annual rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, helping to temper the overall inflation figure. Diesel prices declined by 8.8 pence per litre during the month to an average of 167.6 pence, while petrol prices dropped by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels decreased to 15.5% from 21.3%. Additionally, airfares increased by 11.7% from June to July, compared with a 30.2% rise during the same period in 2025.
Inflation remains steady as services sector growth slows
Core CPI inflation was steady 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 decreased slightly from 3.6% to 3.4%. The Bank of England maintains its inflation target at 2%. 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 increase.
The July data shows that headline CPI inflation is 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, whereas core CPIH edged up to 2.9% from 2.8%. Housing and household services continued to be the largest contributor to CPIH inflation for the 25th consecutive month. Food’s contribution to inflation was smaller, while slower transport inflation helped offset the rise in household energy costs. The next official consumer inflation report, covering August 2026, is scheduled for release on September 16, providing updated price movement data.