UK Inflation Jumps to 2.9% in July, Ending a Four-Month Slide as Ofgem's Energy Price Cap Bites

UK inflation picked up pace in July 2026, with the Consumer Prices Index (CPI) rising 2.9% year-on-year, up from 2.6% in June, the Office for National Statistics (ONS) reported. It's the first time the annual rate has increased since March 2026, after four straight months of cooling.

The main culprit was household energy bills. Ofgem's regulated price cap rose 13% for the July-to-September quarter, and gas prices jumped 14.7% year-on-year — ONS says the largest gas price rise since October 2022, leaving gas prices at their highest level since March 2024. ONS said the increase reflects higher wholesale energy costs during a 12-week assessment window (18 February–18 May 2026) that was, for the first time, affected by the conflict in the Middle East. ONS cited Ofgem's original estimate that this puts the typical dual-fuel direct-debit bill at £1,862/year, a rise of £221; Ofgem separately updated its typical-household consumption assumptions on 1 July to reflect lower usage, which puts its own updated headline typical bill at £1,663 for the same quarter — the two figures use different consumption baselines and aren't directly comparable.

Not everything pushed prices higher. Falling diesel and petrol prices pulled transport inflation down to 3.6% from 5.7% the month before. Underlying (core) inflation, which strips out food and energy, held flat at 2.6%, though the core CPIH measure — which includes housing costs — ticked up to 2.9%, its first rise since February.

Headline Rate Breaks a Four-Month Downtrend

The UK's Consumer Prices Index (CPI) rose 2.9% in the 12 months to July 2026, the Office for National Statistics said, up from 2.6% in June and marking the first acceleration in the annual rate since March 2026. On a monthly basis, CPI rose 0.3% in July, compared with a 0.1% rise in July 2025. The broader CPIH measure, which includes owner-occupiers' housing costs, rose 3.1% year-on-year, up from 2.8% in June — also its first increase since March. Core CPI, which excludes energy, food, alcohol and tobacco, held steady at 2.6%, while core CPIH ticked up to 2.9% from 2.8%, its first rise since February 2026.

An Energy Price Cap Reset Drove the Reacceleration

The single largest contributor to July's uptick was housing and household services, where the annual rate jumped to 4.1% from 2.7% in June. Within that, gas prices rose 14.7% year-on-year, compared with a 7.2% fall a year earlier — ONS says the largest gas price increase since October 2022, leaving gas prices at their highest level since March 2024. Electricity prices also turned higher, up 3.6% versus a 3.8% fall a year ago. ONS attributed the move to Ofgem's revised energy price cap, which rose 13% and took effect in July 2026 for the July-September quarter; ONS cited Ofgem's original estimate that this raises the typical dual-fuel, direct-debit household's annual bill to £1,862, an increase of £221. Note: Ofgem separately updated its typical consumption assumptions on 1 July to reflect households using less energy, which puts its own updated headline typical bill at £1,663 for the same quarter — a lower figure using different consumption baselines, not a contradiction of the £1,862 rise ONS quoted. ONS noted the 12-week assessment period Ofgem used to set the cap — 18 February to 18 May 2026 — was the first such window affected by the outbreak of conflict in the Middle East, which pushed up wholesale energy prices.

Falling Fuel Prices and Volatile Air Fares Offset Some of the Rise

Transport provided the largest offsetting effect, with its annual inflation rate slowing to 3.6% in July from 5.7% in June. Diesel prices fell 8.8 pence per litre over the month to average 167.6p per litre, while petrol fell 3.1p to average 152.2p. Air fares told a more mixed story: prices on European short-haul routes fell 4.3% year-on-year, while long-haul fares rose 31.7%, a divergence ONS linked to Middle East-related airspace disruption and flight suspensions that have reduced capacity and raised costs on long-haul routes more than short-haul ones.

Food, Clothing and Furniture Prices Also Shifted

Food and non-alcoholic beverage inflation eased to 1.3% from 1.7% in June — its lowest reading since September 2021 — with meat and vegetable prices the main drags. Clothing and footwear prices rose 0.5% year-on-year, reversing a 0.5% fall in June, with the smallest July month-on-month price fall (-0.9%) since 2020, which ONS linked partly to earlier-than-usual summer discounting and warm weather boosting retail volumes. Furniture and household goods prices rose 1.0% year-on-year after falling 0.2% in June — the smallest July price fall since 1989.

Why It Matters

July's reading breaks a run of four consecutive monthly declines in UK inflation and complicates the picture for the Bank of England, which has been weighing further interest-rate cuts against a still-above-target inflation rate. Because the jump was concentrated in a regulated, one-off price cap adjustment rather than broad-based demand pressure, policymakers are likely to look closely at core and services inflation — which held roughly steady — for signs of whether the pickup is a single-quarter effect or the start of a more persistent trend.

Reader Q&A

Why did UK inflation rise in July after four months of declines?

The main driver was a jump in regulated household energy prices. Ofgem's price cap rose for the July-September quarter, pushing gas prices up 14.7% year-on-year — the sharpest increase since October 2022 — which lifted the housing and household services category to a 4.1% annual rate from 2.7% in June.

Did the Middle East conflict play a role?

ONS says yes, indirectly. The 12-week window Ofgem used to calculate the new price cap (18 February-18 May 2026) was the first assessment period affected by the outbreak of conflict in the Middle East, which pushed up wholesale energy prices feeding into the cap. The conflict has also been linked to higher long-haul air fares via airspace disruption and reduced capacity.

Is underlying inflation also picking up, or is this just energy?

It's mixed. Core CPI (excluding energy, food, alcohol and tobacco) was flat at 2.6%, and CPI services inflation eased slightly to 3.4% from 3.6%. But core CPIH rose to 2.9% from 2.8% — its first increase since February — so the underlying picture isn't entirely energy-driven.

What offset the rise in energy costs?

Falling motor fuel prices. Diesel fell 8.8 pence per litre and petrol fell 3.1 pence per litre over the month, pulling transport annual inflation down to 3.6% from 5.7% in June.

When is the next UK inflation release?

ONS is scheduled to publish the August 2026 Consumer Price Inflation bulletin on 16 September 2026.