LONDON / RankWire.AI / – UK inflation climbed to its highest level since March during July, primarily due to increased 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 increase in the annual inflation rate since March. On a monthly basis, prices rose by 0.3% from June, contrasting with a 0.1% monthly increase 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, up from 2.8% in June. During the same period, CPIH also advanced by 0.3% after remaining relatively stable in July 2025. This measure accounts for owner occupier housing costs and Council Tax, which are excluded from the standard CPI. The biggest upward contribution to the annual inflation rate came from housing and household services, while transport costs provided the largest offset to the overall rise.
Inflation for housing and household services accelerated to 4.1% in July, up from 2.7% in June. Gas prices surged by 14.7% during July after decreasing by 7.2% in the same month last year. Electricity prices increased by 3.6%, reversing a 3.8% decline from the previous year. 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, this cap equated to an annual cost of £1,862, representing an increase of £221.
Energy Price Hikes Push Inflation Upward
Prices for furniture and household goods were 1.0% higher than a year earlier, following 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 drop since 1989. Clothing and footwear inflation increased 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 limit the overall inflation rate. Diesel prices fell by 8.8 pence per litre during the month to an average of 167.6 pence. Petrol prices decreased by 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.
Core Inflation Remains Steady as Services Growth Decelerates
Core CPI inflation stayed at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased from 1.7% to 2.2%, while services inflation eased slightly from 3.6% to 3.4%. The Bank of England continues to target a 2% inflation rate. Its Monetary Policy Committee maintained the Bank Rate at 3.75% during the July meeting, with six members voting to hold the rate and three supporting a quarter-point increase.
The July data shows headline CPI inflation 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, while core CPIH increased slightly 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 partially offset the higher household energy costs. The next official consumer price update is scheduled for September 16 and will include price movements from August 2026.