Inflation has hit its highest level in four months, driven by higher energy bills.
New figures from the Office for National Statistics showed inflation rose by 2.9% in the 12 months to July 2026, up from 2.6% the previous month.
It marks the first time since March that the 12-month rate has increased.
The ONS said housing and household services, particularly gas and electricity, led the upward contributions to the change in inflation. The increase in gas prices was the largest rise since October 2022, when the war in Ukraine sent prices spiralling.
Gas prices are now at their highest level since March 2024, the figures show.
Sarah Pennells, consumer finance expert at Royal London, said: “The increase in the inflation rate is not unexpected, following the 13% rise in the energy price cap, which kicked in at the start of July.
“While the VAT reduction will lower the average annual household energy bill by around £44 from October, experts expect the overall energy price cap to rise again. The outlook will be disappointing for people who are already struggling with the cost of everyday essentials.”
Jonathan Raymond, investment manager at Quilter Cheviot, said: “A renewed spike in inflation has been expected as the war in the Middle East continues to navigate a clunky ceasefire. Things remain far from normal in the Strait of Hormuz and look unlikely to be resolved any time soon, meaning pressure is likely to remain on prices for the remainder of the year at least.
“That said, inflation is expected to moderate in the coming months as government activities begin to take effect on the headline number.”
Raymond said cuts to VAT on energy bills and discounted leisure and hospitality offerings will begin to feed through in official numbers, however these are unlikely to be at the pace needed by the Bank of England to consider cutting rates.
Raymond added: “Today’s data combined with last week’s surprisingly upbeat growth figures means the Bank of England is likely to remain cautious at its next meeting and continue to wait for more concerning data before acting either way.
“The direction of travel remains that one rate rise is coming this year, but we still have one more inflation statistic release before it next meets. Interest rates back at 4% will be difficult for consumers to stomach, but until it is clear that the impact of events in the Middle East have subsided and the UK economy is back on an even keel, this period of higher for longer is likely to remain in place for the foreseeable future.”
Kevin Brown, savings expert at Scottish Friendly, commented: “The Bank of England is expected to hold rates in September, although it will have August’s inflation reading to consider before then.
“But with the majority of forecasts pointing to inflation remaining above its two per cent target into next year, policymakers face the perpetual balancing act of getting ahead of rising prices without choking off economic momentum.”
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