LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to escalating household energy costs. The Consumer Prices Index climbed 2.9% compared to the previous year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices grew by 0.3% from June, compared to a 0.1% monthly rise in July 2025. The Office for National Statistics published these figures on August 19.
The broader CPIH measure saw a 3.1% year-on-year rise in July, up from 2.8% in June. The CPIH also increased by 0.3% during the month after remaining relatively stable in July 2025. This measure accounts for owner occupier housing costs and Council Tax, which are not included in the standard CPI. The largest upward contribution to the change in annual inflation came from housing and household services, while transport provided the most significant offset to the overall increase.
Inflation for housing and household services accelerated to 4.1% in July, up from 2.7% in June. Gas prices surged 14.7% in July after decreasing by 7.2% in the same month last year. Electricity prices also rose 3.6%, reversing a 3.8% decline from the previous year. Ofgem raised the energy price cap by 13% for the period from July through September. For a typical dual-fuel household paying via direct debit, the cap was set at £1,862 annually, representing an increase of £221.
Energy Expenses Propel Inflation Upward
Prices for furniture and household goods increased by 1.0% compared to last year, after falling 0.2% in June. During July, prices in this category declined by 0.4%, a smaller decrease than the 1.6% fall seen in July 2025, marking 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%, the 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 rate. Diesel prices dropped by 8.8 pence per litre to an average of 167.6 pence. Petrol prices decreased by 3.1 pence per litre, reaching 152.2 pence. The annual inflation rate for motor fuels fell to 15.5% from 21.3%. Meanwhile, airfares increased by 11.7% between June and July, compared with a 30.2% rise during the same period in 2025.
Core Inflation Remains Stable as Service Sector Growth Decelerates
Core CPI inflation stayed 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 slightly decreased to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee maintained the Bank Rate at 3.75% at its July meeting, with six members voting to keep the rate steady and three supporting a quarter-point increase.
The July data indicates that headline CPI inflation is now 0.9 percentage points above the Bank’s target. CPIH services inflation remained at 3.6%, whereas core CPIH edged up to 2.9% from 2.8%. For the 25th month in a row, housing and household services remained the primary contributors to CPIH inflation. While food’s contribution to inflation decreased, slower transport inflation partly offset the impact of higher household energy costs. The next official consumer inflation report is scheduled for September 16, covering price changes in August 2026.