LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to rising household energy expenses. The Consumer Prices Index rose by 2.9% compared to the same month last year, increasing from 2.6% in June. This marked the first annual rise since March. Additionally, prices grew by 0.3% from June, contrasting with a 0.1% monthly increase in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure saw a 3.1% annual increase in July, up from 2.8% in June. During the month, CPIH also rose by 0.3%, after remaining relatively unchanged 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 rise.
Inflation in housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices saw a 14.7% jump in July after decreasing by 7.2% during the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline recorded a year earlier. Ofgem increased its energy price cap by 13% for the period from July through September. For an average dual-fuel household paying via direct debit, the cap translated to an annual cost of £1,862, an increase of £221.
Rising Energy Expenses Accelerate Inflation
Prices for furniture and household goods rose 1.0% compared to the previous year, after falling by 0.2% in June. During July, prices in this category decreased by 0.4%, compared to a 1.6% decline in July 2025. This was the smallest July decrease for the category since 1989. Inflation in clothing and footwear increased to 0.5% from negative 0.5%. Meanwhile, 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 contain 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 3.1 pence per litre to 152.2 pence. Yearly inflation for motor fuels decreased to 15.5% from 21.3%. Airfares increased by 11.7% from June to July, compared with a 30.2% rise during the same period in 2025.
Core Inflation Remains Steady as Services Growth Slows
Core CPI inflation held 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 decreased slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. At its July meeting, the Monetary Policy Committee maintained the Bank Rate at 3.75%, with six members voting to hold and three supporting a quarter-point increase.
The July data shows headline CPI inflation is 0.9 percentage points above the central bank’s target. CPIH services inflation remained steady at 3.6%, while core CPIH slightly increased to 2.9% from 2.8%. Housing and household services contributed the most to CPIH inflation for the 25th consecutive month. Food contributed less to the overall increase, and slower transport inflation helped offset higher household energy costs. The next official consumer inflation update is scheduled for September 16, covering price changes in August 2026.
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