UK inflation accelerated to 2.9% in the 12 months to July 2026, up from 2.6% in June, according to figures released by the Office for National Statistics (ONS) on 19 August 2026. The rise was driven chiefly by higher gas prices and an increase in the household energy price cap, marking a faster pace of price growth for goods and services than in the previous month.
The ONS attributed the uptick largely to energy costs, which rose after regulator Ofgem lifted its price cap on gas and electricity bills by 13% from 1 July 2026, adding £221 a year to the typical household's outgoings.
What pushed inflation higher in July?
The main driver was the increase in the energy price cap that took effect on 1 July 2026. According to the detailed breakdown published by Ofgem's summary of changes, the typical direct debit household bill rose from £1,641 to £1,862 a year, while prepayment meter customers saw their bills increase from £1,597 to £1,812. Ofgem had announced the 13% rise on 27 May 2026 and said the new cap was 6% higher than the equivalent period in 2025 once adjusted for inflation, according to the regulator's press release.
How does this compare with previous months?
Inflation had been on a downward path before this rise, having fallen to 2.6% in the year to June 2026 from 2.8% in May, as reported in our earlier coverage of falling inflation in June and separately confirmed in our report on slowing inflation driven by fuel prices. That June figure had already been flagged by analysts as temporary relief before an expected rebound, a forecast borne out by this latest data, which our earlier report on the anticipated squeeze — UK braces for fresh cost of living squeeze — had projected inflation reaching exactly 2.9% in July. Separately, the ONS's CPIH measure, which includes owner-occupier housing costs, rose 2.8% in the year to June 2026, down from 3.0% in May, according to ONS data.
What does this mean for underlying price pressures?
Beneath the headline figure, some cost pressures appear to be easing even as energy costs rise. UK Finance's August 2026 review found that services inflation eased to 3.6% while core inflation, which strips out volatile food and energy prices, held steady at 2.6%, according to the UK Finance monthly economic review. The Bank of England's July 2026 Monetary Policy Report had already noted that CPI inflation stood at 2.6% in June, still above its 2% target, according to the Bank of England's report, which described that reading as below earlier peaks.
What happens next?
The Bank of England is expected to weigh the latest inflation reading as part of its August 2026 policy discussions, after its July report flagged inflation running above target. Separately, independent forecasts cited by the Scottish Government project that UK inflation could reach 3.2% by the end of 2026, according to the Scottish Economic Bulletin.
Key Facts
- UK inflation rose to 2.9% in the 12 months to July 2026, up from 2.6% in June.
- Ofgem's energy price cap rose 13% from 1 July 2026, adding £221 a year to typical bills.
- The direct debit energy cap rose from £1,641 to £1,862 a year; prepayment meter bills rose from £1,597 to £1,812.
- Core inflation held at 2.6% and services inflation eased to 3.6% in August 2026, per UK Finance.
- Independent forecasts suggest inflation could climb to 3.2% by the end of 2026.
