UK Inflation Rises to 4-Month High

The UK’s annual inflation rate rose to 2.9% in July 2026, the highest in four months, from 2.6% in June and in line with market expectations. The largest upward contribution came from housing and household services (4.1% vs 2.7% in June), reflecting the 13% hike in Ofgem’s energy price cap that took effect last month. Gas prices surged 14.7%, the biggest increase since October 2022, while electricity prices rose 3.6%. Prices also rebounded for furniture and household goods (1.0% vs -0.2%) and clothing and footwear (0.5% vs -0.5%), while inflation increased for alcohol and tobacco (2.5% vs 2.1%) and health (3.7% vs 2.5%). Meanwhile, transport inflation slowed (3.6% vs 5.7%) due to lower motor fuel prices, particularly diesel. The average price of diesel fell by 8.8 pence per litre between June and July 2026. Food inflation also eased to 1.3% from 1.7%. On a monthly basis, CPI inflation increased 0.3%, matching market forecasts and following a 0.1% rise in June.

The annual inflation rate in the UK eased to 2.6% in June 2026 from 2.8% in May, slowing more than the expected fall to 2.7%. This marked the lowest reading since March 2025, driven by moderating transport inflation (5.7% vs. 6.8% in May), with the largest downward contribution coming from motor fuels, particularly diesel. The average price of diesel fell by 10.7 pence per litre between May and June, reaching 176.4 pence per litre, while petrol prices declined by 2.1 pence to 155.3 pence per litre. Food inflation also cooled to 1.7%, the lowest since August 2024, from 2.2%, with the largest drag coming from sugar, jam, syrups, chocolate, and confectionery. Inflation also eased for alcohol and tobacco (2.1% vs. 2.4%), while prices declined for clothing and footwear (-0.5% vs. 0.2%) and furniture and household goods (-0.2% vs. -0.1%). On a monthly basis, consumer prices rose 0.1%, in line with forecasts, following a 0.2% increase in May.

The annual inflation rate in the UK stood at 2.8% in May 2026, unchanged from the previous month and below market expectations of 3.0%. The reading remained at its lowest level since March last year. Inflation slowed in housing and household services (2.7% vs. 3.0% in April), the softest level in almost two years, as owner-occupiers’ housing costs continued to ease, while food and non-alcoholic beverages decelerated further (2.2% vs. 3.0%), hitting their lowest level since December 2024. Price growth also moderated in clothing and footwear (0.2% vs. 0.7%) and recreation and culture (1.5% vs. 1.7%). This was offset by upward pressure from transport inflation, which accelerated sharply to 6.8%, the highest since December 2022, up from 4.5% in April, driven by higher motor fuel prices, rising air fares, and an upward effect from vehicle excise duty (VED). On a monthly basis, the CPI rose by 0.2% in May, below forecasts of a 0.4% gain and easing from a 0.7% increase in April.