LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily fueled by escalating household energy expenses. The Consumer Prices Index climbed 2.9% compared to the same month last year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices grew by 0.3% from June, contrasting with a 0.1% monthly rise 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, accelerating from 2.8% in June. CPIH also advanced by 0.3% during the month after nearly no change in July 2025. This measure accounts for owner occupier housing costs and Council Tax, which are not included in the standard CPI. The main upward contribution to the change in annual inflation came from housing and household services, while transport provided the most significant offset to the overall increase.
Inflation for housing and household services rose to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% during July after decreasing by 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline recorded a year earlier. Ofgem increased its energy price cap by 13% for July through September. For a typical dual-fuel household paying via direct debit, this cap equated to £1,862 annually, representing an increase of £221.
Rising energy expenses push inflation higher
Prices for furniture and household goods increased by 1.0% compared to the previous year, following a decline of 0.2% in June. During July, prices in this category fell by 0.4%, compared to a 1.6% decrease in July 2025. This was the smallest July decline for the category since 1989. Meanwhile, inflation for clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation 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 temper the overall inflation rate. Diesel prices dropped 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 decreased 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 stable as services growth slows
Core CPI inflation held 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 eased slightly to 3.4% from 3.6%. The Bank of England maintains a 2% inflation goal. Its Monetary Policy Committee kept the Bank Rate at 3.75% during its July meeting, with six members voting to hold the rate and three supporting a quarter-point rise.
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%, whereas core CPIH edged up from 2.8% to 2.9%. Housing and household services continued to be the largest contributor to CPIH inflation for the 25th month in a row. Food contributed less to overall inflation, and slower transport inflation partially offset the increased costs of household energy. The upcoming official consumer inflation report is scheduled for September 16 and will include price movements during August 2026.
}**