LONDON / RankWire.AI / – UK inflation increased to its highest point since March in July, mainly due to climbing household energy expenses. The Consumer Prices Index grew by 2.9% compared to the previous year, up from 2.6% in June, marking the first annual rise since March. Additionally, prices rose 0.3% from June, contrasting with a 0.1% monthly increase in July 2025. The Office for National Statistics published these figures on August 19.
The broader CPIH measure saw an annual increase of 3.1% in July, up from 2.8% in June. CPIH also grew 0.3% during the month after remaining relatively stable in July 2025. This measure incorporates owner occupier housing costs and Council Tax, which are not included in the standard CPI. Housing and household services contributed the most to the rise in annual inflation, while transport provided the largest offset to the overall increase.
Inflation in housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% during July, following a 7.2% decrease in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem increased its energy price cap by 13% for July through September. For an average dual-fuel household paying by direct debit, the cap equated to £1,862 annually, an increase of £221.
Energy costs fuel inflation surge
Prices for furniture and household goods rose 1.0% compared to a year earlier after falling 0.2% in June. In that category, prices decreased 0.4% during July, compared with a 1.6% decline in July 2025, marking the smallest July decline for the sector 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%, the lowest annual rate since September 2021.
Transport inflation decelerated to 3.6% in July from 5.7% in June, helping to limit the overall headline rise. Diesel prices fell by 8.8 pence per litre during the month to an average of 167.6 pence, while petrol prices decreased 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuel 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 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 rose to 2.2% from 1.7%, while services inflation eased to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee held the Bank Rate at 3.75% during the July meeting, 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 central 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 continued to be the largest contributors to CPIH inflation for the 25th consecutive month. Food contributed less to overall inflation, while slower transport inflation partially offset the effects of higher household energy costs. The next official consumer inflation report is scheduled for September 16 and will include price movements during August 2026.