The Consumer Prices Index (CPI) rose by 3.8% in the 12 months to July 2025, up from 3.6% in the 12 months to June 2025, data published by the Office for National Statistics on Wednesday (20 August) shows.
That means inflation is at its highest level for 18 months and still far above the Bank of England’s target of 2%.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.2% in the 12 months to July 2025, up from 4.1% in the 12 months to June.
Transport, particularly air fares, made the largest upward contribution to the monthly change in both CPIH and CPI annual rates; housing and household services, particularly owner occupiers’ housing costs, made a large, partially offsetting, downward contribution in CPIH.
“Inflation rose again this month to its highest annual rate since the beginning of last year,” said ONS Chief Economist Grant Fitzner.
“The main driver was a hefty increase in air fares, the largest July rise since the collection of air fares changed from quarterly to monthly in 2001. This increase was likely due to the timing of this year’s school holidays,” he said.
Fitzner noted that the price of petrol and diesel also increased this month, compared with a drop this time last year.
“Food price inflation continues to climb, with items such as coffee, fresh orange juice, meat, and chocolate being the biggest rises,” he said.
The Bank of England’s MPC voted to cut interest rates by 25 basis points to 4% on 7 August, but analysts believe it might just be the first of several cuts planned for the rest of the year.
The MPC said it continues to be vigilant about the extent to which easing pay pressures will feed through to consumer price inflation.
CPI inflation is forecast to increase slightly further to peak at 4.0% in September. Inflation is expected to fall back thereafter towards the 2% target, although the Committee said it remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process.
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