Prices of housing , energy and services helped drive up the rate this month
Inflation is at its highest in four months, although it’s nowhere near as high as at the peak of the cost of living crisis.
But why does money still feel a bit tight? Here, we explain everything you need to know about the latest inflation stats and which savings accounts offer inflation-beating rates.
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What is the current rate of inflation in the UK?
The current CPI rate of inflation in the UK is 2.9% for July 2026, according to the latest figures from the Office for National Statistics (ONS). That’s an increase from 2.6% in June and the highest it’s been in four months. However, it’s much lower than the 3.8% rate a year ago.
The current rate of core inflation (which removes more volatile products like food and fuel) in the UK is 2.6%, which is unchanged from last month. Services inflation, which includes things like rent, childcare, internet and phone services, remained high at 3.4% while some goods inflation fell, like food.
Meanwhile, RPI (still used in some cases such as rail fares, interest on student loans and air passenger duty) in the UK increased from 3% to 3.2%.
Historic inflation rates
The graph below shows how CPI inflation has changed in the UK.
What is inflation?
The main thing to remember is even if the rate of inflation is falling, prices are still going up. They’re just increasing by a slower rate.
Check out our What are inflation and deflation? article to learn more about what price changes count towards inflation, as well as explanations of the different measures including CPI and RPI.
What’s changed this month?
The higher inflation rate was driven by increases in housing and service prices.
Housing and household services went up from 1.2% last month to 4.6% in July. Gas is up 8% in a year while furniture and household goods is up 1% compared to -0.2% in June.
Rent inflation went up from 3.4% to 4.1%, childcare is up 4.2%, mobile phone services increased 9% and internet services are up 12.1%.
With inflation, there are usually a number of economic and global factors that impact it. For example, the recent increased mortgage rates may have resulted in higher rent inflation. And service prices will have gone up quicker because businesses have seen their own costs increase as a result of rising minimum wage and employer National Insurance.
But it doesn’t make it any easier on households. We all need somewhere to live and the services that are seeing higher inflation, such as mobile and broadband, are essential to most of us – so many of us will be feeling the pinch despite inflation being lower than 12 months ago.
We saw the last energy price cap go up by 13% in July, costing the average household an extra £221 a year, as a result on ongoing conflict in Iran.
Food prices, however, slowed to 1.3% compared to 1.7% in June, with butter down 5.3%. Restuarant and hotel inflation also fell to 4% in July.
You can see how prices have changed for individual items in this ONS calculator, while this chart shows the annual CPI rates over 12 months for the last three months.
| May 2026 (%) | June 2026 (%) | July 2026 (%) | One month change | |
|---|---|---|---|---|
| CPI All items | 2.8 | 2.6 | 2.9 | 0.3 |
| Food and non-alcoholic beverages | 2.2 | 1.7 | 1.3 | -0.4 |
| Alcohol and tobacco | 2.4 | 2.1 | 2.5 | 0.4 |
| Clothing and footwear | 0.2 | -0.5 | 0.5 | 1 |
| Housing and household services | 1.2 | 1.2 | 4.6 | 3.4 |
| Furniture and household goods | -0.1 | -0.2 | 1 | 0.8 |
| Health | 2.4 | 2.5 | 3.7 | 1.2 |
| Transport | 6.8 | 5.7 | 3.6 | -2.1 |
| Communication | 5.1 | 5.2 | 5 | -0.2 |
| Recreation and culture | 1.5 | 1.7 | 1.4 | -0.3 |
| Education | 5.1 | 5.1 | 5.1 | N/A |
| Restaurants and hotels | 4.2 | 4.4 | 4 | -0.4 |
| Miscellaneous goods and services | 2.4 | 2.7 | 2.7 | N/A |
| All goods | 2 | 1.7 | 2.2 | 0.5 |
| All services | 3.7 | 3.6 | 3.4 | -0.2 |
| CPI exc food, energy, alcohol and tobacco (core CPI) | 2.6 | 2.6 | 2.6 | N/A |
Source: Consumer price inflation from the Office for National Statistics
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Will inflation go up or down?
After a surprise fall in inflation last month, we expected it to bounce back. And with the ongoing conflict in the Middle-East putting pushing up energy prices, experts warn we could see inflation increase later on in the year to above 3.2%, which is lower than previously forecasted.
It’ll then probably be a gradual drop to the Bank of England’s 2% target, which could easily take until 2027 to reach.
What does it mean for the base rate of interest?
In July, the Bank of England kept the base rate to 3.75%.
With inflation being driven up by a war that shows no signs of relenting, it would be easy to assume further increases to the base rate to get it under control. However, experts say inflation might not be as bad as expected.
The Bank’s suggested the base rate could be 4.2% in Q3 of 2027, and remain there in the same quarters in 2028 and 2029. If that was to come to pass, we’d expect two 0.25 percentage point increases in the next 12 to 15 months. In contrast, the markets are pricing in two hikes this year.
However, as ever these are just predictions and could change at any time.
What does it mean for future price increases
This month’s inflation rate isn’t linked to any specific benefits or increases. Here are the main price hikes linked to inflation rates:
- July RPI – rail fares in March
- September CPI – benefits including State Pension in April
- December CPI – student loans in September
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Do any savings accounts beat inflation?
If possible, it’s always important to have interest rates higher than inflation – otherwise you’re losing money in real terms.
Four in five savings accounts beat the current rate of inflation, according to Moneyfacts, although not all are going to be right for you.
The top-paying savings account is Halifax’s regular saver which offers 8% for 12 months. It’s worth noting that this is a regular savings account and you can only pay in a maximum of £250 a month.
You can also earn 6% with the Santander Edge Saver on up to £4,000, if you hold a Santander Edge account. If you add direct debits (to earn cashback) on the linked current account there’s a monthly fee for the current account, so keep that in mind when comparing savings rates.
However if you’re looking for accounts without these balance restriction, there are still a good number of easy access and fixed rate savings accounts above the inflation rate.
When is the next inflation announcement?
The next inflation announcement will be on 26 September 2026. 6The ONS publishes inflation figures each month and has confirmed the following dates for upcoming announcements :
- 21 October 2026
- 16 December 2026
Hi Andy, great summary, very professional. I’m still learning about all of these subjects, so thanks for that!
Do you know what to expect regarding the interest rate of the savings accounts? Are the banks planning to reduce the interest rate soon based on the reduction in the UK inflation?
Government controlled ONS will produce low incorrect data for September in order to determine next years pension & benefit increases then “amend” the data by December so the government can claim that it is too late to correct next years increases.