UK Inflation Increases To 2.9% pa - Our Briefing July 2026

Headline: UK inflation rose to 2.9% in July 2026, driven mainly by higher energy costs and strong increases in housing and household services.

1. Headline Figures

• CPI: 2.9% (up from 2.6% in June)

• Monthly CPI: +0.3%

• CPIH: 3.1%

• RPI: 3.2% (up from 3.0%)

Key drivers:

• July’s energy price cap increase

• Higher gas and electricity costs

• Rising prices in housing, household services, furniture, clothing and health

• Transport provided the largest downward contribution

2. Category Movements (12‑Month CPI Change)

Strongest upward movements:

• Housing & household services: +3.4%

• Furniture & household goods: +1.2%

• Health: +1.2%

• Clothing & footwear: +1.0%

• Alcohol & tobacco: +0.4%

Largest falls:

• Transport: –2.1%

• Restaurants & hotels: –0.4%

• Food & non‑alcoholic beverages: –0.4%

3. RPI Commentary

RPI increased to 3.2%, remaining significantly above CPI. Because RPI uses an arithmetic mean and includes housing costs more heavily, many analysts view it as a closer reflection of real‑world household inflation. The uptick may indicate underlying inflationary pressure despite earlier signs of easing.

4. Bank of England Outlook

The Bank of England held interest rates on 30 July, and current data suggests the same outcome is likely at the 17 September meeting.

Key considerations:

• Labour market continues to cool, reducing wage‑driven inflation risk

• Energy‑driven inflation is harder to control through interest rates

• Services inflation remains persistent

• August’s inflation reading may be less comfortable due to rising oil prices and the July energy cap increase

5. Forward View: What to Expect

Inflation may rise again in August due to:

• Higher oil and gas prices linked to tensions in the Strait of Hormuz

• July’s energy price cap continuing to feed through

• Persistent services inflation

• Ongoing transport and logistics pressures

Broader outlook: Energy markets remain volatile. The Bank of England will need to balance falling headline inflation with stubborn underlying pressures, particularly in services and energy.

6. Takeaways

• Headline inflation is rising again, mainly due to energy costs

• Underlying pressures remain, especially in services

• Interest rates are expected to remain on hold in September

• Volatility in global energy markets is likely to influence inflation over the coming months