LONDON / RankWire.AI / – UK inflation climbed to its highest point since March in July, primarily driven by increased household energy costs. The Consumer Prices Index (CPI) rose by 2.9% compared to the previous year, up from 2.6% in June. This marked the first uptick in the annual rate since March. On a monthly basis, prices grew by 0.3% from June, compared with a 0.1% increase in July 2025. The Office for National Statistics announced the data on August 19.
In addition, the broader CPIH measure saw a 3.1% annual increase in July, accelerating from 2.8% in June. CPIH also experienced a 0.3% rise during the month, after little change in July 2025. This measure encompasses owner occupier housing costs and Council Tax, which are not included in the standard CPI. Housing and household services contributed most significantly to the rise in annual inflation, while transport offset the overall increase the most.
Inflation for housing and household services accelerated 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 costs increased by 3.6%, reversing a 3.8% decrease a year earlier. Ofgem raised its energy price cap 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.
Energy expenses propel inflation upward
Prices for furniture and household goods increased by 1.0% compared to the previous year, after a 0.2% decline in June. In that category, prices fell 0.4% during July, compared with a 1.6% decline in July 2025. This was the smallest July decrease for the category since 1989. Inflation for clothing and footwear rose to 0.5% from negative 0.5%. Meanwhile, food and non-alcoholic beverages inflation slowed to 1.3%, marking its lowest annual rate since September 2021.
Transport inflation decreased to 3.6% in July from 5.7% in June, helping to limit the overall headline increase. Diesel prices dropped by 8.8 pence per litre to an average of 167.6 pence. Petrol prices fell by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuel eased 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 eases
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. During its July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to maintain the rate and three voting for a quarter-point increase.
The July figures indicate that headline CPI inflation remains 0.9 percentage points above the Bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH edged up to 2.9% from 2.8%. For the 25th consecutive month, housing and household services were the main contributors to CPIH inflation. Food contributed less to overall inflation, and slower transport inflation partly offset the rise in household energy costs. The next official consumer inflation update is scheduled for September 16 and will include price changes during August 2026.
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