LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily driven by rising household energy prices. The Consumer Prices Index grew by 2.9% compared to the previous year, an increase from 2.6% in June. This marked the first annual rise since March. Additionally, prices climbed 0.3% from June, contrasting with a 0.1% monthly increase in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure recorded a 3.1% yearly increase in July, up from 2.8% in June. During the same period, CPIH also grew by 0.3%, after minimal change in July 2025. The CPIH includes owner occupier housing costs and Council Tax, which are not part of the standard CPI measure. The main contributors to the rise in annual inflation were housing and household services, whereas transport inflation provided the largest offset to the overall increase.
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 decline of 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline a year earlier. The energy regulator Ofgem raised its energy price cap by 13% for the period from July through September. For an average dual-fuel household paying via direct debit, this cap equated to an annual cost of £1,862, which is £221 higher.
Rising 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 July, prices in this category fell by 0.4%, a smaller decrease than the 1.6% drop observed in July 2025. This was the smallest July decline for this category since 1989. Meanwhile, inflation for clothing and footwear rose to 0.5% from negative 0.5%. Food and non-alcoholic beverage prices increased at a slower pace, reaching 1.3%, 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 figure. Diesel prices decreased by 8.8 pence per litre during the month, averaging 167.6 pence. Petrol prices dropped by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels slowed to 15.5% from 21.3%. Additionally, airfares increased by 11.7% between June and July, compared with a 30.2% rise during the same period in 2025.
Inflation remains steady as services growth slows
Core CPI inflation stayed at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased from 1.7% to 2.2%, while services inflation softened slightly to 3.4% from 3.6%. The Bank of England continues to aim for a 2% inflation target. During its July meeting, the Monetary Policy Committee maintained the Bank Rate at 3.75%, with six members voting to keep the rate unchanged and three members supporting a quarter-point increase.
The July data shows headline CPI inflation sitting 0.9 percentage points above the Bank’s target. CPIH services inflation held at 3.6%, while core CPIH rose marginally to 2.9% from 2.8%. For the 25th consecutive month, housing and household services contributed the most to CPIH inflation. Food’s contribution decreased, and slower transport inflation partially offset the higher costs for household energy. The next official consumer inflation report is scheduled for September 16 and will cover price changes during August 2026.