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The UK CPI inflation rate for July 2025, which was 3.8%, up 0.2% on June.
CPI inflation for July rose by 0.2% over the previous month to 3.8%. That was 0.1% above market expectations and keeps inflation at its highest level since January 2024. In its August Monetary Policy Summary the Bank of England said “CPI inflation is forecast to increase slightly further to peak at 4.0% in September”.
The UK CPI reading was up 0.1% between June and July, which compares with a 0.2% fall in the corresponding period of 2024. The CPI/RPI gap widened by 0.2% to 1.0% with the RPI annual rate rising by 0.4% (to 4.8%). Over the month, the RPI index rose 0.4%.
The Office for National Statistics (ONS)’s favoured CPIH index rose by 0.1% to an annual 4.2%, again reducing its historically high margin above the CPI. As we have regularly said in recent months, a large part of that excess is due to the owner occupiers’ housing (OOH) category, which has a 17.1% weighting in the CPIH but is absent from the CPI. The OOH inflation rate dropped 0.9% to 5.5%, 2.5% off its peak January 2025 level and back to the levels seen in late 2024 and early 2024.
The ONS attributed the increased CPIH inflation to:
Main upward drivers
Transport. Overall prices in the transport division rose by 3.2% in the 12 months to July 2025, up from 1.7% in the 12 months to June. On a monthly basis, prices rose by 2.2% in July 2025, compared with a rise of 0.7% a year ago.
The rise in the annual rate reflected a large upward effect from airfares which increased by 30.2% between June and July 2025, compared with a rise of 13.3% between the same months in 2024. The monthly rise in July 2025 is the largest July increase since the ONS collection of airfares changed from quarterly to monthly in 2001 and was probably influenced by the timing of school summer holidays. Returning European flights were during the school term in 2024, whereas returning European flights were during the school holidays in 2025 which, to quote an understating ONS, “may have made these flights more expensive”.
The rise in the annual rate also reflected a large upward effect from motor fuels. Although both petrol and diesel are cheaper than a year ago, between June and July 2025 prices rose, whereas in 2024 they fell.
Restaurants and hotels. Prices in this division saw an overall rise of 3.4% in the 12 months to July 2025, up from 2.6% in the 12 months to June. On a monthly basis, prices rose by 0.4% in July 2025, compared with a fall of 0.4% a year ago.
The largest upward effect came from accommodation services, specifically from overnight hotel stays booked the night before. There were smaller upward effects from restaurants and cafes, and from canteens.
Food and non-alcoholic beverages. The 12-month inflation rate for food and non-alcoholic beverages was 4.9% in July 2025, the fourth consecutive increase in the rate. It remains at the highest recorded since February 2024, but is well below the peak of early 2023. On a monthly basis, sector prices rose by 0.4%, compared with little change a year ago.
Main downward driver
Housing and household services. The 12-month inflation rate for housing and household services was 6.2% in July 2025, down from 6.7% in June. On a monthly basis, prices fell by 0.4% in July 2025, compared with a rise of 0.1% a year ago.
The easing in the 12-month rate between June and July 2025 principally reflected a downward effect from OOH costs. There was also a downward effect from rents, which rose by 4.5% in the 12 months to July 2025, compared with a rise of 5.8% in June 2025. This was the lowest annual growth for rents since October 2022. On a monthly basis, rents rose by 0.4% in July 2025, compared with a rise of 1.7% a year ago.
A counteracting upward effect came from electricity, where prices rose by 8.0% in the 12 months to July 2025 compared with a rise of 4.5% in June 2025. Monthly electricity prices fell by 3.8% compared with a fall of 6.8% a year ago. The changes were driven by the new Ofgem price cap and are a reminder of how they build a lag into the UK CPI compared to CPI measures elsewhere.
Five of the twelve broad CPI divisions saw annual inflation increase, while six fell and one remained unchanged. The categories with highest annual inflation rate were led by Education (7.5%), Housing, water, electricity, gas and other fuels (7.4%) and Communication (6.1%).
Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) rose 0.1% to 3.8%. Goods inflation rose 0.3% to 2.7%, while services inflation, a focus for the Bank of England, was up 0.3% at 5.0%.
The ONS has identified problems in the calculation of its Producer Price Inflation indices and, in June, issued a statement that publication of the data would be “paused” for the time being. This remains the case.
Source: Techlink Professional
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