LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, predominantly driven by escalating household energy expenses. The Consumer Prices Index increased by 2.9% compared to the same month last year, up from 2.6% in June. This marked the first uptick in the annual inflation rate since March. Additionally, prices rose 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 wider CPIH measure saw an annual increase of 3.1% in July, accelerating from 2.8% in June. During the same month, CPIH also grew by 0.3%, after showing minimal change in July 2025. This measure incorporates owner occupier housing costs and Council Tax, which are not included in the standard CPI. The main contributors to the rise in annual inflation were housing and household services, while transport provided the most significant offset to the overall increase.
In July, inflation for housing and household services rose to 4.1%, 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 an average dual-fuel household paying by direct debit, the cap equated to £1,862 annually, reflecting an increase of £221.
Energy expenses push 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 July, prices in this category fell by 0.4%, compared with a 1.6% drop in July 2025. This represented the smallest July decline for the category since 1989. Inflation for clothing and footwear rose to 0.5% from a negative 0.5%. Food and non-alcoholic beverage prices slowed to a 1.3% increase, marking the lowest annual inflation rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, helping to limit the overall inflation rate. Diesel prices fell by 8.8 pence per litre, averaging 167.6 pence. Petrol prices dropped 3.1 pence per litre to 152.2 pence. Annual inflation for motor fuels decreased 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.
Stable core inflation amidst easing services sector growth
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 slightly declined 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 steady and three supporting a quarter-point hike.
The July data places headline CPI inflation at 0.9 percentage points above the Bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH rose modestly to 2.9% from 2.8%. Housing and household services have been the largest contributors to CPIH inflation for 25 consecutive months. Food’s contribution to inflation diminished, while slower transport inflation partly offset the impact of rising household energy costs. The upcoming official consumer inflation report is scheduled for September 16, covering price changes during August 2026.