LONDON / RankWire.AI / – UK inflation increased to its highest point since March in July, mainly due to escalating household energy costs. The Consumer Prices Index grew by 2.9% from the same month last year, up from 2.6% in June. This marked the first uptick in the annual inflation rate since March. Additionally, prices grew 0.3% compared to June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics announced these figures on August 19.
The wider CPIH measure saw a 3.1% annual increase in July, accelerating from 2.8% in June. During the same month, CPIH also rose by 0.3% after remaining relatively stable in July 2025. This metric incorporates owner occupier housing costs and Council Tax, which are not included in the standard CPI. The primary contributions to the increase in annual inflation came from housing and household services, while transport provided the most significant offset to the overall rise.
Inflation for housing and household services climbed to 4.1% in July, up 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 costs increased by 3.6%, reversing a 3.8% decline observed a year earlier. Ofgem raised the energy price cap by 13% for the period from July through September. For a typical dual-fuel household paying via direct debit, the cap equated to £1,862 annually, representing an increase of £221.
Energy Expenses Propelling Inflation Upward
Prices for furniture and household goods rose by 1.0% compared to the previous year, after a 0.2% decline in June. In July, prices in this category fell by 0.4%, compared with a 1.6% decline in July 2025. This was the smallest July decrease for the category since 1989. Inflation in clothing and footwear increased to 0.5% from negative 0.5%. Meanwhile, food and non-alcoholic beverage inflation slowed to 1.3%, the lowest annual rate since September 2021.
Transport inflation eased to 3.6% in July from 5.7% in June, helping to temper the overall inflation figure. Diesel prices decreased by 8.8 pence per litre during the month to an average of 167.6 pence, while petrol prices dropped 3.1 pence per litre to 152.2 pence. Annual inflation for motor fuels declined 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 Remains Steady as Service Sector Growth 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 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. Its Monetary Policy Committee maintained the Bank Rate at 3.75% during its July meeting, with six members voting to keep the rate unchanged and three supporting a quarter-point increase.
These July figures show headline CPI inflation surpassing the Bank’s target by 0.9 percentage points. CPIH services inflation remained at 3.6%, while core CPIH rose marginally from 2.8% to 2.9%. Housing and household services continued to be the largest contributor to CPIH inflation for the 25th consecutive month. Food’s contribution to overall inflation diminished, while slower growth in transport prices helped 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.