LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, largely driven by increased household energy costs. The Consumer Prices Index went up 2.9% compared to the previous year, a rise from 2.6% in June. This marked the first annual increase since March. Month-over-month, prices also grew by 0.3%, compared with a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure registered a 3.1% yearly increase in July, up from 2.8% in June. During the month, CPIH advanced by 0.3%, after little change was observed in July 2025. This measure incorporates owner occupier housing costs and Council Tax, which are not included in the standard CPI. The primary contributions to the change in annual inflation came from housing and household services, while transport provided the largest offset to the overall upward trend.
Inflation for housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% during July after a decrease of 7.2% in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem increased its energy price cap by 13% for the period from July through September. For an average dual-fuel household paying by direct debit, this cap equated to £1,862 annually, an increase of £221.
Energy costs propel inflation upward
Prices for furniture and household goods increased by 1.0% compared to a year earlier, after declining 0.2% in June. That 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 the category since 1989. Inflation in clothing and footwear rose to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, reaching its lowest annual rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, helping to limit the overall headline increase. Diesel prices fell 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.
Core inflation remains steady as services growth slows
Core CPI inflation held 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% during its July meeting, with six members voting to hold the rate steady and three supporting a quarter-point hike.
The July data shows headline CPI inflation is 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, while core CPIH edged 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 inflation, and slower transport inflation partly offset higher household energy costs. The next official consumer inflation report is scheduled for September 16 and will include price movements during August 2026.