LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to increased household energy costs. The Consumer Prices Index grew by 2.9% compared to the previous year, an increase from 2.6% in June. This marked the first annual rate rise since March. Month-on-month, prices also rose by 0.3% from June, contrasted with a 0.1% increase in July 2025. The Office for National Statistics announced the figures on August 19.
The broader CPIH measure increased by 3.1% annually in July, up from 2.8% in June. During the same period, CPIH also saw a 0.3% increase after remaining relatively stable in July 2025. This indicator includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The largest contributions to the annual inflation change came from housing and household services, while transport provided the most significant offset to the overall rise.
Inflation for housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% during July after decreasing by 7.2% in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem increased the energy price cap by 13% for July through September. For an average dual-fuel household paying via direct debit, the cap equated to £1,862 annually, which is £221 higher.
Energy expenses fuel the upward trend in inflation
Furniture and household goods prices rose by 1.0% compared to a year earlier, following a decline of 0.2% in June. In that category, prices fell by 0.4% during July, compared with a 1.6% decrease in July 2025. This was the smallest July decline for this category since 1989. Meanwhile, inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation eased to 1.3%, marking the lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to limit the overall headline increase. Diesel prices dropped by 8.8 pence per litre during the month to an average of 167.6 pence. Petrol prices fell by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels declined 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.
Inflation remains steady as services sector growth slows
Core CPI inflation stayed 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 maintains its 2% inflation target. During its July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to keep it steady and three supporting a quarter-point hike.
The July figures position headline CPI inflation 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, whereas core CPIH rose marginally 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 decreased, and slower transport inflation partly offset the impact of rising household energy costs. The next official consumer inflation report, covering August 2026, is due on September 16, detailing price movements for that period.
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