LONDON / RankWire.AI / – UK inflation increased to its highest point since March in July, primarily driven by escalating household energy prices. The Consumer Prices Index (CPI) climbed 2.9% compared to the same period last year, up from 2.6% in June. This marks the first annual increase since March. Additionally, prices rose 0.3% from June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics published these data on August 19.
In July, the broader CPIH measure grew by 3.1% annually, a rise from 2.8% in June. CPIH also experienced a 0.3% increase during 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 transportation 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 decreasing by 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem lifted its energy price cap by 13% for July through September. For an average dual-fuel household paying via direct debit, this cap equated to £1,862 annually, representing an increase of £221.
Energy Expenses Push Inflation Higher
Prices for furniture and household goods rose by 1.0% compared to the previous year, following a 0.2% decline in June. During July, prices in this category fell by 0.4%, compared with a 1.6% decrease in July 2025. This was the smallest July decline in the category since 1989. Inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, its lowest annual rate since September 2021.
Transport inflation decelerated to 3.6% in July from 5.7% in June, helping to temper the overall headline rise. 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 eased 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.
Core Inflation Stable as Service Sector Growth Diminishes
Core CPI inflation remained 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%, whereas services inflation softened slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. At 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 supporting a quarter-point rise.
The July data show headline CPI inflation is 0.9 percentage points above the Bank’s target. CPIH services inflation held at 3.6%, while core CPIH increased marginally to 2.9% from 2.8%. For the 25th consecutive month, housing and household services contributed most significantly to CPIH inflation. Food’s contribution diminished, while slower transport inflation partly offset higher household energy costs. The next official consumer inflation report is scheduled for September 16, covering price movements during August 2026.