LONDON / RankWire.AI / – UK inflation reached its highest point since March in July, mainly due to climbing household energy costs. The Consumer Prices Index grew by 2.9% compared to the same month last year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices rose 0.3% from June, compared with a 0.1% monthly increase in July 2025. The Office for National Statistics published these figures on August 19.
In the broader CPIH measure, the annual rise was 3.1% in July, up from 2.8% in June. CPIH also grew by 0.3% during the month, contrasting with little change in July 2025. This index includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The largest contributions to the annual inflation increase came from housing and household services, while transport costs provided the main offsetting impact.
In July, inflation for housing and household services accelerated to 4.1%, up from 2.7% in June. Gas prices surged by 14.7% during July, after a 7.2% decrease in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline observed a year earlier. Ofgem raised its energy price cap by 13% for the period from 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 propel inflation upwards
Prices for furniture and household goods rose by 1.0% compared to last year, after a 0.2% decline in June. During July, prices in this category fell 0.4%, compared to a 1.6% decrease in July 2025, marking the smallest July decline for the sector since 1989. Meanwhile, inflation in clothing and footwear increased to 0.5%, from negative 0.5%. Food and non-alcoholic beverage inflation slowed to 1.3%, reaching its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping to restrain the overall inflation figure. Diesel prices decreased by 8.8 pence per litre during the month, averaging 167.6 pence. Petrol prices dropped 3.1 pence per litre to 152.2 pence. The annual inflation rate for motor fuel eased to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, compared to a 30.2% rise during the same period in 2025.
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 its 2% inflation goal. At the July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to hold the rate and three supporting a quarter-point increase.
The July data shows headline CPI inflation was 0.9 percentage points above the Bank’s target. CPIH services inflation remained at 3.6%, with core CPIH edging higher to 2.9% from 2.8%. Housing and household services continued to be the largest contributor to CPIH inflation for the 25th consecutive month. Food contributed less to overall inflation, while slower transport inflation partly offset the rise in household energy costs. The next official consumer inflation report is scheduled for September 16 and will include data for August 2026.