UK inflation rises to four-month high as energy bills surge

British inflation climbed to 2.9% in July, up from 2.6% in June, hitting its highest level since March. The culprit is familiar: energy bills, which spiked after Ofgem raised its price cap by 13% at the start of the month.

The data, published by the Office for National Statistics on August 19, landed exactly where markets expected it. That doesn’t make it any more comfortable for households watching their gas bills climb by 14.7%, the steepest increase since October 2022.

What’s driving the numbers

Core CPI, which strips out volatile items like energy and food, held steady at 2.6%. The broader measure of inflation, CPIH, which includes owner-occupiers’ housing costs, rose to 3.1% from 2.8% the prior month.

Global energy markets have been rattled by geopolitical tensions, particularly the US-Israel conflict with Iran, which has kept oil and gas prices elevated.

Vicky Pryce, Chief Economic Adviser at the Centre for Economics and Business Research, warned that continued energy price shocks are likely to strain both households and businesses going forward.

The long road from 11%

UK inflation peaked above 11% in late 2022, driven by the energy crisis that followed Russia’s invasion of Ukraine. Inflation had been declining steadily, reaching a low of 2.6% in June 2026, the lowest in 15 months.

What it means for the Bank of England

The core inflation reading at 2.6% suggests underlying price pressures aren’t accelerating. But central bankers know that sustained energy price increases have a way of bleeding into broader costs. Businesses pass higher energy expenses on to customers. Workers, facing higher living costs, push for wage increases.

The next Ofgem price cap review will be a critical signpost. If global energy prices remain elevated, another increase could push headline inflation even higher in the autumn. Pryce’s warning about ongoing pressures from geopolitical instability suggests this isn’t a one-quarter blip.