LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, mainly driven by increased household energy bills. The Consumer Prices Index grew by 2.9% compared to the previous year, up from 2.6% in June. This marked the first annual increase since March. Prices also rose by 0.3% from June, contrasting with a 0.1% monthly increase in July 2025. The Office for National Statistics published these figures on August 19.
The broader CPIH measure increased by 3.1% annually in July, up from 2.8% in June. CPIH also grew by 0.3% during the month after little change in July 2025. This measure includes owner occupier housing costs and Council Tax, which are not part of the standard CPI. The largest contribution to the annual inflation increase came from housing and household services, while transport provided the greatest offset.
In July, inflation for housing and household services accelerated to 4.1% 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 prices increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem raised its energy price cap by 13% for July through September. For a typical dual-fuel household paying by direct debit, the cap amounted to £1,862 annually, an increase of £221.
Energy expenses propel inflation upward
Prices for furniture and household goods increased by 1.0% compared to the previous year, after a 0.2% decline in June. During July, prices in this category fell by 0.4%, compared with a 1.6% decrease in July 2025. This was 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%, its lowest annual rate since September 2021.
Transport inflation decelerated to 3.6% in July from 5.7% in June, helping to limit the overall inflation rate. Diesel prices dropped by 8.8 pence per litre to an average of 167.6 pence. Petrol prices fell by 3.1 pence per litre to 152.2 pence. Annual inflation for motor fuels eased to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, compared to a 30.2% rise during the same period in 2025.
Core inflation stabilizes as services inflation eases
Core CPI inflation remained steady at 2.6% in July, unchanged from June. This metric excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation slowed to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee kept the Bank Rate at 3.75% during July, with six members voting to maintain the rate and three supporting a quarter-point hike.
The July data shows headline CPI inflation is 0.9 percentage points above the Bank’s target. CPIH services inflation remained at 3.6%, while core CPIH slightly increased to 2.9% from 2.8%. Housing and household services were the biggest contributors to CPIH inflation for the 25th month in a row. Food contributed less to overall inflation, and slower transport inflation somewhat offset the higher household energy costs. The next official inflation report, covering August 2026, is scheduled for release on September 16.