LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily driven by increased household energy costs. The Consumer Prices Index increased by 2.9% from the previous year, up from 2.6% in June. This marked the first annual rate increase since March. Prices also rose by 0.3% from June, compared to a 0.1% monthly increase in July 2025. The Office for National Statistics published 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 same month, CPIH also grew by 0.3% after remaining relatively stable in July 2025. This measure accounts for owner-occupier housing costs and Council Tax, which are excluded from the standard CPI. The biggest upward contribution to the change in annual inflation came from housing and household services, while transport provided the largest offset to the overall rise.
Inflation in housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% during July, following a 7.2% decline in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decrease 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 equated to £1,862 annually, which is £221 more than before.
Energy expenditure fuels inflationary growth
Prices for furniture and household goods increased by 1.0% compared to the previous year after a 0.2% decline in June. In that category, prices fell by 0.4% during July, compared with a 1.6% decline in July 2025, marking the smallest July decrease for the category since 1989. Inflation for clothing and footwear rose to 0.5% from negative 0.5%. Inflation for food and non-alcoholic beverages eased to 1.3%, reaching its 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 decreased by 3.1 pence per litre to 152.2 pence. The annual inflation rate 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.
Services growth slows while core inflation remains steady
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 decreased slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee maintained the Bank Rate at 3.75% at its July meeting, with six members voting to keep the rate unchanged and three voting for a quarter-point increase.
The July data shows headline CPI inflation being 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, while core CPIH increased marginally to 2.9% from 2.8%. For the 25th consecutive month, housing and household services continued to be the primary contributors to CPIH inflation. Food contributed less to overall inflation, while slower transport inflation partially offset the rising household energy costs. The next official consumer inflation report, covering August 2026, is scheduled for release on September 16.