LONDON / RankWire.AI / – UK inflation hit its highest point since March in July, mainly due to rising household energy expenses. The Consumer Prices Index saw an increase of 2.9% compared to the same month last year, up from 2.6% in June. This marked the first annual rise since March. On a monthly basis, prices grew by 0.3% from June, contrasting with 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% annual increase in July, accelerating from 2.8% in June. During the month, CPIH also increased by 0.3%, following minimal change in July 2025. This indicator includes owner occupier housing costs and Council Tax, which are not part of the standard CPI calculation. The primary drivers of the overall inflation increase came from housing and household services, while transport prices provided the largest offset to the rise.
Inflation in housing and household services accelerated to 4.1% in July from 2.7% in June. Gas prices climbed 14.7% during July after a 7.2% decrease in the same period last year. Electricity costs rose by 3.6%, reversing a 3.8% decline a year earlier. Ofgem’s energy price cap was raised by 13% for July through September. For an average dual-fuel household paying via direct debit, the cap equated to £1,862 annually, an increase of £221.
Energy expenses propel inflation upward
Prices for furniture and household goods were 1.0% higher than a year ago, after a 0.2% decline in June. During July, prices in this category fell by 0.4%, compared to a 1.6% decrease in July 2025. This represented the smallest July decline for the category since 1989. Clothing and footwear inflation rose to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation eased to 1.3%, marking its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to contain the overall inflation rate. 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 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 stabilizes as services inflation shows signs of easing
Core CPI inflation remained 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 slowed slightly 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% at the July meeting, with six members voting to keep the rate unchanged and three supporting 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 edged up to 2.9% from 2.8%. Housing and household services have contributed to CPIH inflation for 25 consecutive months. Food contributed less to overall inflation, while slower transport inflation helped offset some of the higher household energy costs. The next official consumer inflation report is scheduled for September 16, covering price movements during August 2026.