CPI climbs from June's 15-month low, raising questions over the Bank of England's next move
UK inflation rose to 2.9% in July, up from 2.6% in June, according to figures published by the Office for National Statistics (ONS), as higher energy prices driven by the US-Israel conflict with Iran pushed the Consumer Prices Index (CPI) further above the Bank of England's 2% target.
The monthly CPI rate rose by 0.3% in July 2026, compared with 0.1% in July 2025.
Housing and household services, along with furniture, made the largest upward contributions to the monthly change, while transport provided a partial offset to the downside.
The latest ONS figures also showed core CPI — which excludes energy, food, alcohol and tobacco — held steady at 2.6% in the 12 months to July. The CPI goods annual rate rose from 1.7% to 2.2%, while the CPI services annual rate eased slightly from 3.6% to 3.4%.
The Consumer Prices Index (CPI) rose by 2.9% in the 12 months to July 2026, up from 2.6% in the 12 months to June 2026.
— Office for National Statistics (ONS) (@ONS) August 19, 2026
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The July reading follows a 13% increase in Ofgem's energy price cap last month, which raised the average annual gas and electricity bill by £221 to £1,862. Economists had anticipated the rise to 2.9%.
Inflation had been on course to approach 2% before the outbreak of the Iran conflict in late February, having peaked at 3.8% last year. The Bank of England warned last month that a worst-case scenario involving further escalation could drive UK inflation to 4.5% by mid-2027.
Separate data published on Tuesday pointed to a softening labour market, including falling job vacancies and slower private sector pay growth. Economists said these figures could weigh against a rate rise, even as policymakers consider whether to lift borrowing costs as early as September.
"Today's news may bring a renewed level of concern to many individuals and families, especially over the coming months regarding household outgoings," said Nathan Emerson (pictured right), chief executive of industry body Propertymark.
"Significant fiscal uncertainty, both in the UK and globally, including concerns on energy prices over coming months, is potentially likely to keep inflation rates above pre-2021 levels for now, continuing to potentially impact affordability for existing homeowners and prospective buyers as the year progresses."
For mortgage professionals, the reading carries direct implications for product pricing ahead of the Bank of England's September decision.
"After last month's surprise fall, an inflation bounce-back was always likely," said Ben Thompson (pictured right), director of home moving strategy at Mortgage Advice Bureau. "Fuel prices have been climbing again since the last reading, so today's rise doesn't really tell us anything we didn't expect.
"What actually matters is what this does to the Bank of England's next move, because that's what changes the mortgage deals available."
Thompson noted that lenders price fixed-rate deals not against the current base rate but against their expectations of where rates are heading, meaning inflation figures can affect product availability ahead of any official decision.
He added that the dynamic is similar for those remortgaging, but with greater urgency. "If your current deal ends in the next few months, lenders typically start repricing in the run-up to a Bank decision, not after it," he pointed out. "So, waiting to see what happens at the next base rate announcement in September could mean missing the deals that were only available beforehand."
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