LONDON / RankWire.AI / – UK inflation increased to its highest point since March in July, mainly driven by escalating household energy expenses. The Consumer Prices Index climbed 2.9% compared to the same month last year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices rose 0.3% from June, in contrast 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% rise year-on-year in July, an acceleration from 2.8% in June. During July, CPIH grew by 0.3%, after remaining relatively unchanged in July 2025. This indicator includes owner occupier housing costs and Council Tax, which are not part of the standard CPI measure. The largest contributions to the annual inflation rate 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 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 increased 3.6%, reversing a 3.8% drop a year earlier. Ofgem increased its energy price cap by 13% for the period from July through September. For a typical dual-fuel household paying via direct debit, the cap equated to £1,862 annually, which is £221 higher than before.
Energy price increases push inflation upward
Prices for furniture and household goods rose by 1.0% compared to last year, following a 0.2% decline in June. In that category, prices fell 0.4% during July, compared with a 1.6% decrease in July 2025, marking the smallest July decline since 1989. Meanwhile, inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, 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 headline figure. Diesel prices dropped 8.8 pence per litre during the month to an average of 167.6 pence, while petrol prices fell 3.1 pence to 152.2 pence per litre. Yearly motor-fuel inflation decreased to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, a slowdown compared to a 30.2% rise during the same period in 2025.
Core inflation remains steady as services sector growth slows
Core CPI inflation stayed at 2.6% in July, with no change from June. This measure excludes energy, food, alcohol, and tobacco. While goods inflation increased from 1.7% to 2.2%, services inflation declined slightly from 3.6% to 3.4%. The Bank of England continues to target a 2% inflation rate. At its July meeting, the Monetary Policy Committee kept the Bank Rate steady at 3.75%, with six members voting to hold and three supporting a quarter-point increase.
The July data shows headline CPI inflation was 0.9 percentage points above the Bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH edged up from 2.8% to 2.9%. For the 25th month in a row, housing and household services made the largest contribution to CPIH inflation. Food’s contribution declined, and slower transport inflation partly offset the impact of rising household energy costs. The next official consumer price release, covering August 2026, is scheduled for September 16.