LONDON / RankWire.AI / – UK inflation climbed to its highest point since March in July, mainly driven by increased household energy costs. The Consumer Prices Index rose 2.9% compared to the same month last year, up from 2.6% in June. This marked the first increase in the annual inflation rate since March. Prices also went up by 0.3% from June, contrasting with a 0.1% monthly rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure increased by 3.1% annually in July, up from 2.8% in June. CPIH also grew by 0.3% during the month, after little change in July 2025. This measure includes owner occupier housing costs and Council Tax, which the standard CPI excludes. The biggest contributor to the annual inflation change was housing and household services. Meanwhile, transport provided the largest offset to the overall rise.
Inflation for housing and household services rose to 4.1% in July from 2.7% in June. Gas prices surged 14.7% during July, after decreasing 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline a year earlier. Ofgem raised its energy price cap by 13% for July through September. For a typical dual-fuel household paying by 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 earlier, after falling 0.2% in June. In that category, prices dropped 0.4% during July, compared with a 1.6% decline in July 2025. This was 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 slowed 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 fell by 8.8 pence per litre, averaging 167.6 pence. Petrol prices decreased by 3.1 pence per litre to 152.2 pence. Annual motor-fuel inflation eased to 15.5% from 21.3%. Air fares increased by 11.7% from June to 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 stayed 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 eased to 3.4% from 3.6%. The Bank of England maintains a 2% inflation target. Its Monetary Policy Committee kept the Bank Rate at 3.75% during its July meeting, with six members voting to hold the rate and three supporting a quarter-point hike.
These July figures place headline CPI inflation 0.9 percentage points above the bank’s target. CPIH services inflation remained at 3.6%, while core CPIH rose slightly to 2.9% from 2.8%. Housing and household services continue to be the largest contributors to CPIH inflation for the 25th month in a row. Food’s impact has lessened, and slower transport inflation partly offsets higher household energy costs. The next official consumer inflation report is set for September 16, covering August 2026 price changes.