LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, primarily due to escalating household energy costs. The Consumer Prices Index grew by 2.9% compared to the previous year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices rose by 0.3% from June, compared with a 0.1% increase in July 2025. The Office for National Statistics published these figures on August 19.
The broader CPIH measure saw an annual rise of 3.1% in July, a quickening from 2.8% in June. During the same period, CPIH also advanced 0.3%, after remaining relatively stable in July 2025. This measure incorporates owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The largest upward contribution to the change in annual inflation came from housing and household services, while transport provided the most significant offset to the overall increase.
Inflation for housing and household services increased to 4.1% in July from 2.7% in June. Gas prices surged by 14.7% in July after declining by 7.2% in the same month last year. Electricity costs rose by 3.6%, reversing a 3.8% decrease a year earlier. Ofgem raised the energy price cap by 13% for 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 Fuel Inflation Rise
Prices for furniture and household goods increased by 1.0% compared to a year earlier, after a 0.2% decline in June. In that category, prices fell 0.4% during July, contrasting with a 1.6% decrease in July 2025. This was the smallest July decline for the category since 1989. Inflation in clothing and footwear rose to 0.5% from negative 0.5%. Meanwhile, 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 headline figure. Diesel prices decreased by 8.8 pence per litre during the month, reaching an average of 167.6 pence. Petrol prices fell by 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuels eased 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 rose to 2.2% from 1.7%, while services inflation decreased slightly to 3.4% from 3.6%. The Bank of England continues to aim for a 2% inflation target. At its July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to maintain the rate and three supporting a quarter-point hike.
The July data indicate that headline CPI inflation is 0.9 percentage points above the Bank’s target. CPIH services inflation remained at 3.6%, while core CPIH slightly increased to 2.9% from 2.8%. For the 25th consecutive month, housing and household services contributed the most to CPIH inflation. Food’s contribution to inflation decreased, while slower transport inflation partly offset higher household energy costs. The next official consumer inflation report is scheduled for September 16 and will cover price changes during August 2026.