UK Inflation Rebounds to 2.9% in July, Undoing June's Dip

UK inflation, as measured by the Consumer Prices Index (CPI), rose to 2.9% in the 12 months to July 2026, up from 2.6% in June, according to the Office for National Statistics' bulletin released on 19 August 2026 (ONS). The pickup reverses a notable cooldown in June, which had been the weakest annual CPI reading since March 2025 (Reuters).

To set the scene: CPI had come in at 2.6% year-on-year in June, down from 2.8% in both April and May, per the ONS bulletin published on 22 July (ONS). On a monthly basis, May 2026 had seen a 0.2% increase. July's rebound pushes the headline rate back above the levels that held steady through the spring.

The broader inflation picture, captured by the Consumer Prices Index including owner occupiers' housing costs (CPIH), tells a similar story. CPIH rose by 3.1% in the 12 months to July 2026, up from 2.8% the previous month. On a monthly basis, CPIH advanced 0.3% in July 2026, having been little changed in July 2025. The CPIH all-items index stood at 142.7 (2015=100) in July, while the CPI all-items index was fractionally higher at 142.9 (ONS).

The Retail Prices Index (RPI), a legacy measure that the ONS classifies as a non-National Statistic, recorded a 3.2% annual change in July 2026. The RPI all-items index stood at 419.1 (January 1987=100).

Why the trajectory matters: for the Bank of England's Monetary Policy Committee, June's dip toward 2.6% may have looked like a clean signal that inflation was fading; July's snap back to 2.9% complicates that picture. The gap between headline CPI and CPIH widened to 0.2 percentage points in July from roughly parity in June. A rising CPIH relative to CPI typically signals accelerating housing-cost pressures, particularly in mortgage interest payments and owner-occupier housing depreciation — components that CPIH captures but CPI does not.

The mechanics here are straightforward. The monthly 0.3% CPIH increase in July, against a near-flat comparable month a year earlier, means the base-effect tailwind from July 2025 has turned into a headwind. Think of it like a treadmill: if prices barely moved a year ago, even modest price gains today make the annual rate look bigger. That is exactly what happened this month.

For index-linked gilts (government bonds whose payouts adjust with inflation), the RPI at 3.2% feeds directly into coupon and principal uprating. For wage negotiators and pension trustees using CPI as a benchmark, the move from 2.6% back to 2.9% in a single month is a reminder that the path back to stable prices remains uneven. The Bank of England's 2% target now sits a full percentage point below the July CPI headline.

The next ONS consumer price inflation bulletin is scheduled for release on 16 September 2026, covering the August data. Whether July's rebound proves a one-month blip or the start of a re-acceleration trend will hinge on the composition of the monthly increase, which the bulletin's detailed component breakdown will clarify. What is already clear is that June's soft reading, which Reuters flagged as the weakest since March 2025, did not hold for long.

The broader context here is one of volatility, not a smooth descent. CPI moved from 2.8% in April to 2.8% in May, dropped to 2.6% in June, and rebounded to 2.9% in July. That range, from 2.6% to 2.9%, brackets the kind of sticky, above-target inflation that keeps central banks cautious about cutting interest rates too quickly.