LONDON / RankWire.AI / – UK inflation rose to its highest level since March in July, driven largely by higher household energy costs. The Consumer Prices Index increased 2.9% from a year earlier, up from 2.6% in June. It was the first rise in the annual rate since March. Prices also increased 0.3% from June, compared with a 0.1% monthly rise in July 2025. The Office for National Statistics released the figures on August 19.
The broader CPIH measure rose 3.1% annually in July, accelerating from 2.8% in June. CPIH also advanced 0.3% during the month after showing little change in July 2025. The measure includes owner occupier housing costs and Council Tax, which the standard CPI measure excludes. Housing and household services made the largest upward contribution to the change in annual inflation. Transport provided the largest offset to the overall increase.
Housing and household services inflation accelerated to 4.1% in July from 2.7% in June. Gas prices jumped 14.7% during July after falling 7.2% in the same month last year. Electricity prices rose 3.6%, reversing a 3.8% decline a year earlier. Ofgem raised its energy price cap by 13% for July through September. For a typical dual-fuel household paying by direct debit, the cap equated to £1,862 a year, an increase of £221.
Energy costs drive inflation higher
Furniture and household goods prices were 1.0% higher than a year earlier after declining 0.2% in June. Prices in that category fell 0.4% during July, compared with a 1.6% decline in July 2025. That marked the smallest July fall for the category since 1989. Clothing and footwear inflation rose to 0.5% from negative 0.5%. Food and non-alcoholic beverage inflation eased to 1.3%, its lowest annual rate since September 2021.
Transport inflation slowed to 3.6% in July from 5.7% in June, helping limit the headline increase. Diesel prices fell 8.8 pence per litre during the month to an average 167.6 pence. Petrol prices dropped 3.1 pence per litre to 152.2 pence. Annual motor-fuel inflation eased to 15.5% from 21.3%. Air fares rose 11.7% between June and July, compared with a 30.2% increase during the same period in 2025.
Core inflation holds as services growth eases
Core CPI inflation held at 2.6% in July, unchanged from June. The 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 a 2% inflation target. Its Monetary Policy Committee kept Bank Rate at 3.75% at its July meeting, with six members voting to hold the rate and three supporting a quarter-point increase.
The July figures put headline CPI inflation 0.9 percentage points above the central bank’s target. CPIH services inflation remained at 3.6%, while core CPIH edged up to 2.9% from 2.8%. Housing and household services remained the largest contributor to CPIH inflation for the 25th consecutive month. Food contributed less to inflation, while slower transport inflation partly offset higher household energy costs. The next official consumer inflation release is scheduled for September 16 and will cover price movements during August 2026.