LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, mainly driven by increased household energy costs. The Consumer Prices Index climbed 2.9% year-on-year, up from 2.6% in June. This marked the first annual increase since March. Prices also rose 0.3% compared to June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure saw a 3.1% increase in July, up from 2.8% in June, with a 0.3% monthly rise after little change in July 2025. This measure incorporates owner-occupier housing costs and Council Tax, which are not included in the standard CPI. The largest upward influence on annual inflation came from housing and household services, while transport provided the biggest offset to the overall rise.
Inflation in housing and household services jumped to 4.1% in July from 2.7% in June. Gas prices surged 14.7% during July, after a 7.2% decline in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decrease from the previous year. Ofgem raised its energy price cap by 13% for July through September. For a typical dual-fuel household paying via direct debit, the cap was set at £1,862 annually, a rise of £221.
Energy expenses fuel inflation climb
Prices for furniture and household goods were 1.0% higher than the previous year after a 0.2% decline in June. In July, prices in this category fell 0.4%, compared with a 1.6% drop in July 2025, marking the smallest July decrease since 1989. Clothing and footwear inflation increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, the lowest annual rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, helping to restrain the headline figure. Diesel prices decreased by 8.8 pence per litre to an average of 167.6 pence, while petrol prices fell 3.1 pence per litre to 152.2 pence. Annual inflation for motor fuels decreased to 15.5% from 21.3%. Airfares increased 11.7% between June and July, compared to a 30.2% rise during the same months in 2025.
Services growth slows, while core inflation remains steady
Core CPI inflation stayed 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 July, with six members voting to hold steady and three supporting a 0.25 percentage point hike.
The July data shows headline CPI inflation was 0.9 percentage points above the 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 continued to be the largest contributor to CPIH inflation for the 25th consecutive month. Food’s contribution decreased, and slower transport inflation partly offset higher household energy costs. The next official consumer price release will come on September 16, covering price changes in August 2026.