LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to increased household energy costs. The Consumer Prices Index rose by 2.9% compared to the same month last year, up from 2.6% in June. This marked the first increase in the annual inflation rate since March. On a monthly basis, prices went up by 0.3% from June, contrasting with a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
The wider CPIH measure experienced a 3.1% annual growth in July, accelerating from 2.8% in June. During the same period, CPIH increased by 0.3%, after remaining relatively stable in July 2025. CPIH includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The largest contributions to the annual inflation increase came from housing and household services, while transport provided the most significant offset to the overall rise.
Inflation in housing and household services jumped to 4.1% in July, up 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 prior. Ofgem raised its energy price cap by 13% for July through September. For a typical dual-fuel household paying by direct debit, this cap equated to an annual cost of £1,862, reflecting an increase of £221.
Energy costs propel inflation upward
Prices for furniture and household goods grew by 1.0% compared to the previous year, following a 0.2% decline in June. In July, prices in this category fell by 0.4%, compared with a 1.6% drop in July 2025. This was the smallest July decline for furniture and household goods since 1989. Inflation in clothing and footwear moved up to 0.5% from a negative 0.5%. Meanwhile, food and non-alcoholic beverage inflation eased to 1.3%, marking its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to contain the overall inflation figure. Diesel prices decreased by 8.8 pence per litre during the month, reaching an average of 167.6 pence. Petrol prices dropped by 3.1 pence per litre to 152.2 pence. Annual motor-fuel inflation 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 stable as services inflation slows
Core CPI inflation remained 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 slowed slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. During its July meeting, the Monetary Policy Committee maintained the Bank Rate at 3.75%, with six members voting to keep the rate steady and three supporting a quarter-point increase.
The July inflation 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 rose marginally to 2.9% from 2.8%. Housing and household services remained the primary contributor to CPIH inflation for the 25th consecutive month. Food contributed less to the overall increase, while slower transport inflation partially offset the rising costs of household energy. The next official consumer inflation report, scheduled for September 16, will detail price changes during August 2026.
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