LONDON / RankWire.AI / – UK inflation increased to its highest level since March in July, primarily due to rising household energy costs. The Consumer Prices Index rose 2.9% from the previous year, up from 2.6% in June. This marked the first time the annual rate has increased since March. Monthly prices also edged up by 0.3% from June, compared to a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure saw a 3.1% yearly increase in July, accelerating from 2.8% in June. During the same month, CPIH grew by 0.3%, after remaining relatively stable in July 2025. This measure encompasses owner occupier housing costs and Council Tax, which are not included in the standard CPI. The main upward contribution to inflation came from housing and household services, while transport provided the largest counterbalance to the overall rise.
Inflation for housing and household services accelerated to 4.1% in July, up from 2.7% in June. Gas prices rose 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 seen a year earlier. Ofgem increased 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, which is an increase of £221.
Energy Price Hikes Push Inflation Higher
Prices for furniture and household goods rose 1.0% compared to a year earlier after a 0.2% decline in June. In July, prices in this category fell by 0.4%, compared with a 1.6% decrease in July 2025. This represented the smallest July decline for the category since 1989. Clothing and footwear inflation increased to 0.5%, up from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, marking 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 inflation figure. Diesel prices decreased by 8.8 pence per litre during the month, reaching an average of 167.6 pence. Petrol prices fell 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels eased to 15.5% from 21.3%. Meanwhile, airfares increased by 11.7% between June and July, compared to a 30.2% rise in the same period in 2025.
Core Inflation Remains Steady as Services Sector Growth Slows
Core CPI inflation held steady at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Prices for goods increased to 2.2% from 1.7%, while services inflation slightly eased to 3.4% from 3.6%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee maintained the Bank Rate at 3.75% during the July meeting, with six members voting to keep the rate unchanged and three supporting a quarter-point hike.
The July data shows headline CPI inflation 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 remained the largest contributors to CPIH inflation for the 25th consecutive month. Food’s contribution to inflation decreased, and slower transport inflation partially offset the impact of rising household energy costs. The next official consumer price index release, covering August 2026, is scheduled for September 16.