LONDON / RankWire.AI / – UK inflation increased to its highest point since March in July, mainly due to the rise in household energy bills. The Consumer Prices Index climbed 2.9% compared to the previous year, up from 2.6% in June. This marked the first upward movement in the annual rate since March. Prices also saw a 0.3% increase from June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics announced these figures on August 19.
The CPIH, a broader measure, grew by 3.1% year-on-year in July, up from 2.8% in June. During the month, CPIH also advanced by 0.3%, after remaining relatively unchanged in July 2025. This index includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The biggest upward contributions to the annual inflation rate came from housing and household services, while transport provided the most significant offset to the overall increase.
Inflation within 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% decrease in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decline from the previous year. Ofgem’s energy price cap was raised by 13% for July through September. For a typical dual-fuel household paying via direct debit, the cap equated to £1,862 annually, representing an increase of £221.
Rising energy expenses push inflation upward
Prices for furniture and household goods grew by 1.0% compared to the previous year after a decline of 0.2% in June. The category’s prices fell by 0.4% in July, compared with a 1.6% decrease in July 2025. This marked the smallest July decline for this category since 1989. Inflation for clothing and footwear increased to 0.5% from negative 0.5%. Meanwhile, 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 mitigate the overall increase. Diesel prices dropped by 8.8 pence per litre during the month, reaching 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 fell to 15.5% from 21.3%. Airfares increased by 11.7% from June to July, compared with a 30.2% rise during the same period in 2025.
Core inflation remains steady as services growth slows
Core CPI inflation stayed at 2.6% in July, consistent with June’s figure. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased from 1.7% to 2.2%, while services inflation eased slightly from 3.6% to 3.4%. The Bank of England continues to aim for a 2% inflation target. At its July meeting, the Monetary Policy Committee held the Bank Rate at 3.75%, with six members voting to maintain the rate and three supporting a quarter-point hike.
The July data shows headline CPI inflation was 0.9 percentage points above the bank’s target. CPIH services inflation held at 3.6%, while core CPIH increased marginally from 2.8% to 2.9%. For the 25th consecutive month, housing and household services contributed the most to CPIH inflation. Food’s contribution decreased, and slower transport inflation partly offset the impact of higher household energy costs. The next official consumer inflation report is scheduled for September 16, covering price changes during August 2026.