UK inflation rose to 2.9% in July, driven by higher energy and fuel costs.
Why it matters: The hotter reading keeps pressure on the Bank of England and raises questions about when it can cut rates. For markets and businesses, it also supports a firmer path for sterling-sensitive assets, gilt yields and consumer demand.
- The Office for National Statistics said CPI inflation was 2.9% in the 12 months to July 2026, up from 2.6% in June.
- In its July <a href="https://www.bankofengland.co.uk/monetary-policy-report/2026/july-2026">Monetary Policy Report</a>, the Bank of England said the outlook depends on the size and duration of the energy shock.
- Ofgem raised the energy price cap by 13% for July 1 to September 30, 2026.
- The Bank of England kept Bank Rate at 3.75% at its meeting ending July 29, 2026.
UK inflation accelerated in July, with the Office for National Statistics saying CPI rose 2.9% in the 12 months to July 2026, up from 2.6% in June. The release came in the ONS's latest inflation bulletin on August 19, 2026.
The Bank of England has pointed to energy as a key swing factor. In its July Monetary Policy Report, the central bank said the inflation outlook depends on the size and duration of the energy shock and how those costs spread through the economy.
That backdrop helps explain why the Bank kept Bank Rate at 3.75% at its meeting ending July 29, 2026, saying in its July summary and minutes that it was weighing uncertainty around the energy shock and possible second-round effects.
Energy bills are adding to the pressure. Ofgem raised the price cap by 13% for July 1 to September 30, 2026, adding to household costs just as fuel prices remain elevated.
For markets, the key question is whether the inflation move keeps policy tighter for longer. The latest data make an early rate cut harder to justify without a clearer cooling in prices.
By the numbers
- 2.9% - UK CPI inflation in the 12 months to July 2026, up from 2.6% in June.
- 13% - Ofgem's increase in the energy price cap for July 1 to September 30, 2026.
- 3.75% - The Bank of England's Bank Rate after its July 29, 2026 meeting.
Yes, but: The ONS release shows the inflation jump and the Bank of England's policy stance, but it does not by itself settle how much of the rise will persist into later months.