LONDON / RankWire.AI / – UK inflation reached its highest point since March in July. The main driver was the increase in household energy bills. The Consumer Prices Index grew by 2.9% compared to the previous year, up from 2.6% in June. This marked the first annual rise since March. Prices also went up by 0.3% from June, compared to a 0.1% monthly rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure increased 3.1% year-on-year in July, up from 2.8% in June. CPIH also grew by 0.3% during July, after minimal change in July 2025. This measure includes owner occupier housing costs and Council Tax, which are not part of the standard CPI. Housing and household services were the biggest contributors to the annual inflation change. Transport, however, offset some of the overall increase.
Inflation for housing and household services rose to 4.1% in July, compared to 2.7% in June. Gas prices jumped 14.7% during July, after a 7.2% decline last year. Electricity costs increased by 3.6%, reversing a 3.8% fall a year earlier. Ofgem increased its energy price cap by 13% for the period from July to September. For a typical dual-fuel household paying by direct debit, this cap equals £1,862 annually, an increase of £221.
Energy prices push inflation upward
Furniture and household goods prices rose by 1.0% compared to last year, following a 0.2% decline in June. In July, prices in this category fell by 0.4%, compared to a 1.6% drop in July 2025. This was the smallest July decline for the category since 1989. Inflation in clothing and footwear increased to 0.5% from negative 0.5%. Food and non-alcoholic drink inflation eased to 1.3%, its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to limit the overall increase. Diesel prices dropped 8.8 pence per litre to an average of 167.6 pence. Petrol prices fell 3.1 pence per litre to 152.2 pence. Annual motor-fuel inflation decreased to 15.5% from 21.3%. 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 services growth slows
Core CPI inflation stayed at 2.6% in July, the same as in June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%. Meanwhile, services inflation eased slightly to 3.4% from 3.6%. The Bank of England’s inflation target remains at 2%. Its Monetary Policy Committee kept the Bank Rate at 3.75% during its July meeting. Six members voted to keep the rate steady, while three supported a quarter-point increase.
The July data shows headline CPI inflation is 0.9 percentage points above the bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH rose slightly to 2.9% from 2.8%. Housing and household services continued to be the biggest contributor to CPIH inflation for the 25th month in a row. Food contributed less to overall inflation. Slower transport inflation helped offset the rise in household energy prices. The next official inflation report will be released on September 16, covering August 2026 price changes.