LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to escalating household energy costs. The Consumer Prices Index increased by 2.9% compared to the previous year, up from 2.6% in June. This marks the first annual rise since March. On a monthly basis, prices grew by 0.3% from June, contrasting with a 0.1% increase in July 2025. The Office for National Statistics published these figures on August 19.
The broader CPIH measure rose by 3.1% year-on-year in July, up from 2.8% in June. CPIH also increased by 0.3% during the month after remaining relatively stable in July 2025. This measure includes owner-occupier housing costs and Council Tax, which are not part of the standard CPI. The largest upward contribution to the change in annual inflation came from housing and household services, while transport provided the greatest offset to the overall increase.
In July, inflation for housing and household services jumped to 4.1% from 2.7% in June. Gas prices surged by 14.7% during July after declining by 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% fall recorded a year earlier. Ofgem raised the energy price cap by 13% for July through September. For an average dual-fuel household paying via direct debit, the cap equated to £1,862 annually, an increase of £221.
Energy expenses propel inflation upward
Prices for furniture and household goods rose 1.0% compared to the previous year, after decreasing by 0.2% in June. During July, prices in this category fell by 0.4%, compared with a 1.6% decline in July 2025. This was the smallest July decline for this category since 1989. Meanwhile, inflation for clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage prices eased to 1.3%, marking the lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to limit the overall increase. Diesel prices decreased by 8.8 pence per litre during the month to an average of 167.6 pence. Petrol prices fell 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 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, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation rose to 2.2% from 1.7%, while services inflation decreased 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% at the July meeting, with six members voting to hold the rate steady and three supporting a quarter-point increase.
The July data shows headline CPI inflation was 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, while core CPIH increased slightly to 2.9% from 2.8%. For the 25th consecutive month, housing and household services contributed most to CPIH inflation. Food contributed less to overall inflation, and slower transport inflation helped partly offset higher household energy costs. The next official consumer inflation report is scheduled for September 16, covering price changes in August 2026.