LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to the surge in household energy costs. The Consumer Prices Index climbed 2.9% compared to the same period last year, up from 2.6% in June, marking the first upward shift in the annual inflation rate since March. Prices also grew by 0.3% from June, contrasted with a 0.1% monthly increase in July 2025. The Office for National Statistics published these data on August 19.
The wider CPIH measure saw an annual increase of 3.1% in July, accelerating from 2.8% in June. During the month, CPIH also rose by 0.3%, 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 largest upward contribution to the change in annual inflation came from housing and household services, whereas transport costs provided the most significant offset to the overall rise.
Inflation for housing and household services sped up to 4.1% in July from 2.7% in June, with gas prices jumping 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 recorded a year earlier. Ofgem increased 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 was set at £1,862 annually, reflecting an increase of £221.
Energy Expenses Fuel Inflation Rise
Prices for furniture and household goods climbed 1.0% compared to the previous year after a 0.2% decline in June. In that category, prices fell 0.4% during July, compared with a 1.6% decrease in July 2025, marking the smallest July decline for this group since 1989. Meanwhile, inflation for clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage prices rose at a slower pace, reaching 1.3%, which is the lowest annual rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, contributing to a moderation in the overall inflation figure. Diesel prices dropped by 8.8 pence per litre during the month to an average of 167.6 pence, while petrol prices decreased by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels decreased to 15.5% from 21.3%. Additionally, airfares increased by 11.7% between June and July, a slowdown compared to a 30.2% rise during the same period in 2025.
Core Inflation Remains Stable as Service Sector Growth Slows
Core CPI inflation remained steady at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. While goods inflation increased from 1.7% to 2.2%, services inflation eased slightly from 3.6% to 3.4%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee maintained the Bank Rate at 3.75% during the July meeting, with six members voting to keep it steady and three supporting a quarter-point hike.
The figures for July show that headline CPI inflation was 0.9 percentage points above the bank’s target. CPIH services inflation stayed at 3.6%, whereas core CPIH rose marginally to 2.9% from 2.8%. Housing and household services consistently made the largest contribution to CPIH inflation for the 25th consecutive month. While food’s influence on inflation lessened, slower transport inflation helped offset the effects of rising household energy costs. The next official consumer inflation report is scheduled for September 16, covering price changes during August 2026.
}**ckdxcnf64q9**