LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, largely due to increasing household energy costs. The Consumer Prices Index rose 2.9% compared to the same month last year, up from 2.6% in June. This marks the first annual increase since March. Month-on-month, prices went up by 0.3%, contrasting with a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure recorded a 3.1% year-over-year increase in July, up from 2.8% in June. CPIH also grew by 0.3% during the month after showing little change in July 2025. This measure includes owner occupier housing costs and Council Tax, which are not part of the standard CPI. The biggest contributions to the annual inflation change came from housing and household services, while transport provided the largest offset to the overall rise.
In July, housing and household services inflation rose to 4.1% from 2.7% in June. Gas prices surged by 14.7% during July, after falling 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decrease a year earlier. Ofgem’s energy price cap was raised by 13% for July through September. For a typical dual-fuel household paying via direct debit, the cap equated to £1,862 annually, an increase of £221.
Energy price hikes push inflation upward
Prices for furniture and household goods rose by 1.0% compared to last year, after a 0.2% decline in June. In July, prices in this category decreased by 0.4%, compared with a 1.6% fall in July 2025. This was the smallest July decline for the category since 1989. Inflation for clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, reaching its lowest annual rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, helping to limit the overall increase. Diesel prices dropped by 8.8 pence per litre to an average of 167.6 pence, while petrol prices fell by 3.1 pence per litre to 152.2 pence. Annual motor-fuel inflation slowed 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 steady as services growth slows
Core CPI inflation held at 2.6% in July, the same as in June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased from 1.7% to 2.2%, while services inflation eased slightly from 3.6% to 3.4%. The Bank of England continues to target a 2% inflation rate. 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 increase.
The July data shows headline CPI inflation was 0.9 percentage points above the bank’s target. CPIH services inflation remained steady at 3.6%, while core CPIH edged higher to 2.9% from 2.8%. Housing and household services continued as the largest contributor to CPIH inflation for the 25th consecutive month. Food’s contribution to inflation lessened, and slower transport inflation partly offset higher household energy costs. The next official consumer inflation report is set for September 16 and will include price movements during August 2026.