LONDON / RankWire.AI / – UK inflation experienced its highest level since March during July, largely fueled by rising 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 annual increase since March. On a monthly basis, prices rose 0.3% from June, contrasting with a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure saw a 3.1% annual increase in July, accelerating from 2.8% in June. CPIH also grew by 0.3% over the month after remaining relatively stable in July 2025. This measure incorporates owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The biggest upward influence on annual inflation came from housing and household services, while transport provided the largest offset to the overall rise.
Inflation for housing and household services sped up to 4.1% in July from 2.7% in June. Gas prices jumped 14.7% during July, after decreasing 7.2% in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem raised its energy price cap by 13% for the period of July through September. For an average dual-fuel household paying by direct debit, the cap translated to £1,862 annually, an increase of £221.
Energy costs push inflation upward
Prices for furniture and household goods rose 1.0% compared to the previous year, after declining 0.2% in June. In that category, prices fell 0.4% during July, compared to a 1.6% decrease in July 2025. This was the smallest July decline for this sector since 1989. Meanwhile, inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage 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 increase in prices. Diesel prices dropped by 8.8 pence per litre during the month to an average of 167.6 pence. Petrol prices fell 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels eased to 15.5% from 21.3%. Airfares increased 11.7% between June and July, compared with a 30.2% rise in the same period in 2025.
Core inflation remains steady as service sector 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 declined slightly to 3.4% from 3.6%. The Bank of England continues to aim for a 2% inflation target. At its July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to maintain the rate and three supporting a quarter-point hike.
The July data shows headline CPI inflation at 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 contributed the most to CPIH inflation for the 25th month in a row. Food had a smaller impact, and slower transport inflation partly offset the effects of rising household energy costs. The next official consumer price update, covering August 2026, is scheduled for September 16, 2026.