LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to increased household energy bills. The Consumer Prices Index climbed 2.9% compared to the same month last year, up from 2.6% in June. This marked the first uptick in the annual inflation rate since March. Month-on-month, prices rose 0.3% from June, contrasting with a 0.1% increase in July 2025. The Office for National Statistics published these figures on August 19.
The broader CPIH measure experienced a 3.1% annual increase in July, accelerating from 2.8% in June. During the same period, CPIH also grew by 0.3%, after little change was observed in July 2025. This measure includes owner occupier housing costs and Council Tax, which are not part of the standard CPI calculation. The primary contributor to the rise in annual inflation was housing and household services, while transport provided the most significant offset to the overall increase.
In July, inflation for housing and household services accelerated to 4.1% from 2.7% in June. Gas prices saw a 14.7% jump during July, following a 7.2% decrease 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 from July through September. For an average dual-fuel household paying via direct debit, the cap amounted to £1,862 annually, an increase of £221.
Energy costs propel inflation upward
Prices for furniture and household goods rose 1.0% compared to the previous year after a 0.2% decline in June. In July, prices in this category fell 0.4%, compared with a 1.6% decrease in July 2025, marking the smallest July decline for this category since 1989. Clothing and footwear inflation 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 eased to 3.6% in July from 5.7% in June, helping to limit the overall inflation figure. During the month, diesel prices dropped 8.8 pence per litre 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 fuels fell to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, compared to a 30.2% rise during the same period in 2025.
Core inflation remains stable as services inflation 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 decreased slightly to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee kept the Bank Rate at 3.75% during its July meeting, with six members voting to maintain the rate and three supporting a quarter-point increase.
The July data shows headline CPI inflation remaining 0.9 percentage points above the central bank’s target. CPIH services inflation stayed at 3.6%, whereas core CPIH edged up to 2.9% from 2.8%. Housing and household services have been the largest contributors to CPIH inflation for 25 consecutive months. Food prices contributed less to inflation, while slower transport inflation partly offset the impact of higher household energy costs. The next official consumer inflation report is scheduled for September 16 and will include data from August 2026.