LONDON / RankWire.AI / – UK inflation hit its peak since March during July, mainly due to increasing household energy costs. The Consumer Prices Index climbed 2.9% compared to the previous year, up from 2.6% in June. This marked the first annual increase since March. Month-on-month prices also rose by 0.3%, contrasting with a 0.1% rise in July 2025. The Office for National Statistics announced these figures on August 19.
The broader CPIH measure, which accounts for owner occupier housing costs and Council Tax, increased 3.1% annually in July, up from 2.8% in June. During the month, CPIH also grew by 0.3% after remaining relatively stable in July 2025. While housing and household services contributed most to the upward change in annual inflation, transport prices provided the largest counterbalance to the overall increase.
Inflation for housing and household services rose to 4.1% in July, from 2.7% in June. Gas prices surged by 14.7% in July, following a 7.2% decrease in the same period last year. Electricity costs increased by 3.6%, reversing a 3.8% decline recorded a year earlier. Ofgem increased its energy price cap by 13% for July through September. For an average dual-fuel household paying by direct debit, the cap corresponded to £1,862 annually, an increase of £221.
Energy expenses propel inflation upward
Prices for furniture and household goods rose by 1.0% compared to the previous year after a 0.2% decline in June. In July, prices in this category fell by 0.4%, whereas in July 2025, they declined by 1.6%. This was the smallest July decrease for the category since 1989. Clothing and footwear inflation increased to 0.5% from negative 0.5%. Meanwhile, inflation for food and non-alcoholic beverages 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 inflation figure. Diesel prices dropped by 8.8 pence per litre during the month, reaching an average of 167.6 pence. Petrol prices decreased by 3.1 pence per litre to 152.2 pence. Motor fuel inflation eased from 21.3% to 15.5% annually. Airfares 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 constant at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Prices for goods increased to 2.2% from 1.7%, while services inflation decreased slightly to 3.4% from 3.6%. The Bank of England remains committed to a 2% inflation target. During its July meeting, the Monetary Policy Committee kept the Bank Rate at 3.75%, with six members voting to hold and three advocating for a quarter-point hike.
The July data indicates that headline CPI inflation is 0.9 percentage points above the Bank’s target. CPIH services inflation stayed at 3.6%, while core CPIH edged up from 2.8% to 2.9%. For the 25th consecutive month, housing and household services continued to be the main contributors to CPIH inflation. The contribution of food to overall inflation was less significant, and the slower increase in transport costs partly offset the impact of rising household energy prices. The next official consumer inflation report is scheduled for September 16, covering price movements during August 2026.