LONDON / RankWire.AI / – UK inflation increased to its highest level since March during July, largely due to escalating household energy costs. The Consumer Prices Index went up by 2.9% compared to the same period last year, up from 2.6% in June. This marked the first annual increase since March. Additionally, prices rose 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 climbed 3.1% year-on-year in July, up from 2.8% in June. During the same month, CPIH also grew by 0.3%, after remaining relatively stable in July 2025. This measure includes owner occupier housing costs and Council Tax, which are excluded from the standard CPI. Housing and household services made the most significant contribution to the rise in annual inflation, while transport provided the largest offset to the overall increase.
Inflation for housing and household services accelerated to 4.1% in July, compared to 2.7% in June. Gas prices surged by 14.7% during July, following a 7.2% decline in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decrease recorded 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 Price Hikes Push Inflation Higher
Prices for furniture and household goods increased by 1.0% compared to last year, 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 was the smallest July decline for the category since 1989. Inflation for clothing and footwear rose to 0.5% from a 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 contain the overall increase. Diesel prices dropped by 8.8 pence per litre, reaching an average of 167.6 pence. Petrol prices also fell by 3.1 pence per litre, down to 152.2 pence. The annual inflation rate for motor fuels 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.
Core Inflation Remains Steady as Service Sector Growth Slows
Core CPI inflation stayed constant at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Prices for goods rose to 2.2% from 1.7%, while services inflation eased slightly to 3.4% from 3.6%. The Bank of England maintains its 2% inflation target. At its July meeting, the Monetary Policy Committee kept the Bank Rate steady at 3.75%, with six members voting to hold 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 remained at 3.6%, while core CPIH slightly increased 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, and slower transport inflation partly offset higher household energy costs. The next official consumer price report is scheduled for September 16, covering price changes in August 2026.