UK inflation rises as energy bills jump

UK consumer price inflation picked up in July 2026, with the Consumer Prices Index (CPI) rising to 2.9% in the 12 months to July from 2.6% in the 12 months to June. This marked the highest headline inflation rate in four months and signalled a break from the recent pattern of easing price pressures.

The latest data show that inflation remains above the Bank of England’s 2% target, even though it is well below the peaks reached during the energy crisis. The July reading indicates that inflationary forces in the economy have not fully subsided and can re‑emerge when key cost components, such as energy, move higher.

A key driver of the July increase was higher household energy costs following a change to the Ofgem energy price cap. The regulator’s adjustment to the cap resulted in higher standard variable tariffs for gas and electricity users.

Regulators estimated that for a typical household paying by direct debit for dual fuel, the change in the cap translated into an annual bill of £1,862. This represented an increase of £221 in the typical dual-fuel bill, directly adding to the cost of living for many households.

The impact of the price-cap change fed quickly into the inflation data because energy bills account for a significant share of regular household expenditure. As a result, the energy component of the CPI basket made a notable contribution to the overall July inflation reading.

Within the energy category, gas prices showed particular strength. The rise in gas prices in July was described as the largest since October 2022, underscoring the scale of the latest move.

Gas prices also reached their highest level since March 2024, reversing part of the earlier decline that had helped bring inflation down. These developments highlight the sensitivity of headline inflation to changes in wholesale and regulated energy costs.

City economists had forecast a 2.9% annual inflation rate for July, so the headline figure aligned with market consensus. The in-line result suggests that financial markets had largely anticipated the renewed inflation pressure from energy bills.

Even though the outcome matched expectations, the return to a higher inflation rate underlines the role of regulated energy prices in shaping the path of UK inflation. The July data show that policy and regulatory changes to energy tariffs can rapidly influence national price indices and the financial burden on households.