LONDON / RankWire.AI / – UK inflation climbed to its highest point since March in July, primarily due to rising household energy expenses. The Consumer Prices Index grew by 2.9% compared to the previous year, up from 2.6% in June. This marked the first uptick in the annual inflation rate since March. Additionally, prices increased by 0.3% from June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics published these figures on August 19.
Across the board, the CPIH measure experienced a 3.1% annual rise in July, accelerating from 2.8% in June. During the month, CPIH also grew by 0.3%, after showing minimal change in July 2025. This indicator includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI measure. The biggest contributor to the increase in annual inflation came from housing and household services, while transport provided the largest offset to the overall rise.
In July, inflation for housing and household services accelerated to 4.1% from 2.7% in June. Gas prices experienced a 14.7% jump during July, after decreasing by 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decrease recorded a year earlier. Ofgem raised its energy price cap by 13% for the period from July through September. For a typical dual-fuel household paying by direct debit, this cap translates to an annual cost of £1,862, an increase of £221.
Energy expenses fuel inflation’s upward trend
Furniture and household goods prices rose by 1.0% compared to last year, after a 0.2% decline in June. In July, prices in this category fell by 0.4%, compared to a 1.6% decrease in July 2025. This marked the smallest July decline for furniture and household goods since 1989. Inflation for clothing and footwear increased to 0.5% from negative 0.5%. Meanwhile, food and non-alcoholic beverages 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 limit the overall inflation increase. Diesel prices dropped by 8.8 pence per litre during the month, reaching an average of 167.6 pence. Petrol prices declined by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuel decreased to 15.5% from 21.3%. Additionally, airfares increased by 11.7% between June and July, compared with a 30.2% rise during the same period in 2025.
Core inflation remains steady as services sector growth slows
In July, core CPI inflation stayed at 2.6%, unchanged from June. This measure excludes energy, food, alcohol and tobacco. Goods inflation rose to 2.2% from 1.7%, while services inflation eased 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 keep the rate unchanged 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 held steady at 3.6%, while core CPIH increased marginally from 2.8% to 2.9%. Housing and household services have been the dominant contributors to CPIH inflation for the 25th consecutive month. Food’s contribution to inflation has decreased, and slower transport inflation has somewhat offset the rise in household energy costs. The next official consumer inflation report is scheduled for September 16, covering price changes during August 2026.