LONDON / RankWire.AI / – UK inflation increased to its highest point since March in July, mainly due to the surge in household energy costs. 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 rose by 0.3% from June, contrasting with 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% year-on-year increase in July, up from 2.8% in June. During the month, CPIH also advanced by 0.3%, following minimal change in July 2025. This measure includes owner-occupier housing costs and Council Tax, which are not part of the standard CPI. Housing and household services contributed most significantly to the increase in annual inflation, while transport provided the largest offset to the overall rise.
In July, inflation for housing and household services jumped to 4.1% from 2.7% in June. Gas prices soared by 14.7% during July, after a 7.2% decrease in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline from the previous year. 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, representing an increase of £221.
Energy expenses push inflation upward
Prices for furniture and household goods rose by 1.0% compared to the previous year after falling by 0.2% in June. In that category, prices declined by 0.4% during July, a smaller decrease than the 1.6% drop observed in July 2025. This was the smallest July decline for the category since 1989. Inflation for clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to moderate the overall increase. Diesel prices fell by 8.8 pence per litre to an average of 167.6 pence. Petrol prices decreased by 3.1 pence per litre to 152.2 pence. Annual inflation for motor fuels eased from 21.3% to 15.5%. Airfares rose by 11.7% between June and July, compared to a 30.2% increase during the same period in 2025.
Core inflation stabilizes as services inflation eases
Core CPI inflation remained steady 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. Its Monetary Policy Committee maintained the Bank Rate at 3.75% during its July meeting, with six members voting to keep the rate unchanged and three supporting a quarter-point hike.
The July data shows headline CPI inflation 0.9 percentage points above the bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH ticked up to 2.9% from 2.8%. Housing and household services remained the largest contributors to CPIH inflation for the 25th consecutive month. Food contributed less to overall inflation, while slower transport inflation partly offset the impact of rising household energy costs. The next official consumer inflation report is scheduled for September 16 and will cover price changes during August 2026.