UK CPI Report: July 2026 — Inflation Rises to 2.9% as Ofgem Cap Hits Household Energy Bills
The Office for National Statistics (ONS) released the Consumer Price Index (CPI) report for July 2026 on August 19. Headline CPI rose to 2.9% — up from June's 15-month low of 2.6% and exactly matching economist forecasts. The driver is unmistakable: the July Ofgem energy price cap rise, the first to fully capture the Iran war's impact on wholesale energy costs, added £221 to the average annual household bill.
Headline Overview
| Indicator | Jun 2026 | Jul 2026 | Change |
|---|
| CPI (YoY) | 2.6% | 2.9% | +0.3pp 🔴 |
| CPIH (YoY) | 2.8% | 3.1% | +0.3pp 🔴 |
| Core CPI (excl. food, energy, alcohol & tobacco) | 2.6% | 2.6% | 0.0 |
| Core CPIH | 2.8% | 2.9% | +0.1pp |
| CPI Services | 3.6% | 3.4% | -0.2pp ⬇️ |
| CPI Goods | 1.7% | 2.2% | +0.5pp 🔴 |
| CPIH Services | 3.6% | 3.6% | 0.0 |
| CPI MoM | +0.1% | +0.3% | +0.2pp |
| RPI (YoY) | — | 3.2% | — |
| CPI Index (2015=100) | 142.5 | 142.9 | +0.4 |
| CPIH Index (2015=100) | 142.3 | 142.7 | +0.4 |
Key takeaway: <cite index="51-1">UK inflation climbed to 2.9% year-on-year in July 2026, up from a 15-month low of 2.6% in June, exactly matching economist forecasts. The driver is unmistakable: household energy bills rose sharply as the Ofgem price cap increased. This was the first time since March 2026 that both the CPI and CPIH annual rates had risen.</cite>
✅ The good news: <cite index="51-1">Core CPI held at 2.6%, matching June. Underlying domestic price pressure stayed flat. The headline jump came almost entirely from energy, not from wages feeding through into services prices.</cite> Services inflation actually fell from 3.6% to 3.4% — a reassuring sign for the BoE.
The Ofgem Energy Price Cap — The Central Story
<cite index="55-1">The rise in gas prices came mainly from changes to standard variable tariffs, where there was a change in the Ofgem energy price cap in July 2026. Ofgem estimated that for an average household paying by direct debit for dual fuel, this equates to an annual bill of £1,862, which is a rise of £221.</cite>
<cite index="55-1">The price cap rose in part because of higher wholesale energy prices. The 12-week assessment period used by Ofgem to calculate the July to September 2026 (Quarter 3) price cap was from 18 February to 18 May 2026. This meant it was the first assessment period where prices had been affected by the outbreak of the conflict in the Middle East. The increase was the largest rise in gas prices since October 2022, when UK consumers were initially exposed to the higher prices arising from the energy crisis relating to the war in Ukraine.</cite>
| Ofgem Cap Period | Annual Avg Dual-Fuel Bill | Change |
|---|
| Apr–Jun 2026 | £1,641 | — |
| Jul–Sep 2026 | £1,862 | +£221 (+13%) 🔴 |
| Oct–Dec 2026 (expected) | ~£1,941 | +£79 (+4.2%) 🔴 |
A second Ofgem cap rise is already expected in October, meaning energy will remain an upward pressure on headline CPI into year-end.
Key Sector Inflation — CPI Divisions (Year-on-Year)
| Division | Jun 2026 | Jul 2026 | Change (pp) |
|---|
| Housing & Household Services | 1.2% | 4.6% | +3.4 🔴 |
| — Gas | — | +14.7% MoM | Largest rise since Oct 2022 🔴 |
| — Electricity | — | +3.6% MoM | 🔴 |
| Furniture & Household Goods | -0.2% | +1.0% | +1.2 🔴 |
| Health | 2.5% | 3.7% | +1.2 🔴 |
| Clothing & Footwear | -0.5% | +0.5% | +1.0 🔴 |
| Alcohol & Tobacco | 2.1% | 2.5% | +0.4 🔴 |
| Transport | 5.7% | 3.6% | -2.1 ⬇️ |
| — Motor Fuels | 21.3% | 15.5% | -5.8 ⬇️ |
| — Petrol (avg price) | — | 152.2p/litre | -3.1p MoM ⬇️ |
| — Diesel (avg price) | — | 167.6p/litre | -8.8p MoM ⬇️ |
| — Air Fares (European) | — | -4.3% MoM | ⬇️ |
| — Air Fares (Long-haul) | — | +31.7% MoM | 🔴 Iran disruption |
| Food & Non-Alcoholic Beverages | 1.7% | 1.3% | -0.4 ⬇️ |
| Recreation & Culture | 1.7% | 1.4% | -0.3 ⬇️ |
| Restaurants & Hotels | 4.4% | 4.0% | -0.4 ⬇️ |
| Education | 5.1% | 5.1% | 0.0 |
| Communication | 5.2% | 5.0% | -0.2 ⬇️ |
| Miscellaneous Goods & Services | 2.7% | 2.7% | 0.0 |
🔴 Housing & household services surged from 1.2% to 4.6% YoY — the single largest divisional swing in the report and entirely driven by the Ofgem cap rise. Gas prices rose 14.7% in a single month, the biggest monthly gas price increase since October 2022.
⬇️ Transport fell from 5.7% to 3.6% YoY — the largest downward offset in the report. Diesel fell 8.8p/litre in July, petrol fell 3.1p/litre. European air fares fell 4.3% MoM as demand softened and airlines cancelled unprofitable short-haul routes.
🔴 Long-haul air fares rose 31.7% MoM — a direct consequence of Iran war disruptions forcing longer routing, more fuel use on fuel-intensive wide-body aircraft, and Middle Eastern airspace closures eliminating capacity.
⬇️ Food fell to 1.3% YoY — <cite index="57-1">the lowest since August 2024</cite> — and its contribution to CPIH was the smallest since October 2021. Meat, vegetables, and confectionery all made downward contributions.
⬇️ Clothing & footwear moved into positive territory (+0.5%) from -0.5% in June, driven by a smaller-than-usual seasonal July price fall. The 0.9% monthly drop was the smallest July fall since 2020, as warm weather and summer sales patterns shifted.
Goods vs Services Split
| Measure | Jun 2026 | Jul 2026 | Change |
|---|
| CPI All Goods | 1.7% | 2.2% | +0.5pp 🔴 |
| CPI All Services | 3.6% | 3.4% | -0.2pp ⬇️ |
| CPIH All Goods | 1.7% | 2.2% | +0.5pp 🔴 |
| CPIH All Services | 3.6% | 3.6% | 0.0 |
⬇️ Services inflation easing to 3.4% is the most important signal in this report for the BoE. This is the metric most closely tied to domestic wage dynamics, and it has now fallen from 4.4% in January to 3.4% in July — a substantial 1pp decline in just seven months. This is the BoE's primary concern when setting rates, and the trend is moving in the right direction.
🔴 Goods inflation rising to 2.2% is almost entirely the Ofgem cap — energy goods (gas and electricity in particular) drove the goods acceleration.
CPIH Full Division Table (Jul 2026)
| Division | Jun 2026 YoY | Jul 2026 YoY | Jul 2026 MoM |
|---|
| Food & Non-Alcoholic Beverages | 1.7% | 1.3% | 0.0% |
| Alcohol & Tobacco | 2.1% | 2.5% | +0.2% |
| Clothing & Footwear | -0.5% | +0.5% | -0.9% |
| Housing & Household Services | 2.7% | 4.1% | +0.9% |
| — of which OOH costs | 3.3% | 3.7% | +0.3% |
| Furniture & Household Goods | -0.2% | +1.0% | -0.4% |
| Health | 2.5% | 3.7% | +0.5% |
| Transport | 5.7% | 3.6% | +0.2% |
| Communication | 5.2% | 5.0% | -0.1% |
| Recreation & Culture | 1.7% | 1.4% | -0.1% |
| Education | 5.1% | 5.1% | 0.0% |
| Restaurants & Hotels | 4.4% | 4.0% | 0.0% |
| Miscellaneous Goods & Services | 2.7% | 2.7% | +0.1% |
CPI Historical Trend: 2025–2026
| Month | CPI YoY | CPIH YoY | Core CPI | Services |
|---|
| Jul 2025 | 3.8% | 4.2% | — | — |
| Jan 2026 | 3.0% | 3.2% | 3.1% | 5.0% |
| Feb 2026 | 3.0% | 3.2% | 3.1% | 5.0% |
| Mar 2026 | 3.3% | 3.4% | 3.1% | 4.5% |
| Apr 2026 | 2.8% | 3.0% | 2.5% | 3.2% |
| May 2026 | 2.8% | 3.0% | 2.6% | 3.7% |
| Jun 2026 | 2.6% | 2.8% | 2.6% | 3.6% |
| Jul 2026 | 2.9% | 3.1% | 2.6% | 3.4% |
The structural improvement in services inflation (5.0% → 3.4% since January) is the most important trend in this table. Core CPI has also fallen from 3.1% to 2.6%. The headline volatility is almost entirely energy-driven.
International Comparison (July 2026)
| Country | CPI YoY | Core |
|---|
| UK | 2.9% | 2.6% |
| Germany (flash) | 2.8% | — |
| France (flash) | 2.4% | — |
| USA | 3.4% | 2.5% |
| Canada | ~3.2% (est.) | ~2.2% |
| Nigeria | 15.43% | 14.97% |
The UK at 2.9% is slightly above its European peers but well below the US at 3.4%. The energy price cap mechanism means the UK's energy shock is showing up on a different timetable to the US and Canada, where pump prices are the primary channel.
Bank of England Outlook
| Indicator | Current |
|---|
| Bank Rate | 3.75% (held July 30) |
| MPC vote (July 30) | 6-3 to hold (3 voted for +25bp hike) |
| BoE CPI peak forecast | ~3.2% in Q4 2026 |
| Next MPC meeting | September 17, 2026 |
| Oct Ofgem cap rise | +~£79 (+4.2%) — further upward pressure |
| Next CPI release | 16 September 2026 (August data) |
<cite index="51-1">The Bank of England held Bank Rate at 3.75% on July 30. The MPC voted 6-3 to hold. Three members pushed for a 0.25 percentage point increase to 4.0%, citing the risk of higher energy costs spreading into broader inflation. Today's data keeps that debate open. The Bank projected CPI peaking near 3.2% in Q4 2026, and July's reading tracks that path. A second Ofgem price cap rise is expected in October. BoE Governor Andrew Bailey said at the July meeting that energy prices will stay high and volatile. Inflation, he added, will rise again before year-end.</cite>
The September 17 MPC meeting is the critical decision point. An in-line July print does not shift the dial — but if August's data shows further energy pass-through or services re-acceleration, the 3 dissenters who voted for a hike in July may bring others with them.
Methodological Note
The ONS introduced scanner data from supermarket checkouts covering approximately 50% of the grocery market with the February 2026 index — replacing manual price collection for a large share of food items. The ONS also noted that the government's Great British Summer Savings scheme (VAT cut on cultural events, historic monuments, and cinema admissions, effective June 25) may have contributed modest downward price effects, but did not have a substantial impact on the headline rate.
Source: Office for National Statistics, Consumer Price Inflation, UK: July 2026 (released August 19, 2026)
