# UK inflation expected to rise to 2.9% in July as energy bills jump

**Published:** 2026-08-17T19:43:53.745Z  
**Topic:** Inflation  
**Sentiment:** neutral  
**Publisher:** TrendWatcher — https://www.trendwatcher.in/article/34e358ab-f1de-45e9-a83d-a9746413f401

UK CPI forecast 2.9% for July, up from 2.6% in June, driven by a 13% energy price‑cap hike. See why markets and the Bank of England may react.

The Office for National Statistics is set to publish July CPI at 2.9%, a rise from June’s 2.6% and the highest rate since March, as the Ofgem energy‑price cap lifts by 13% [2][3].

| At a glance | |
|---|---|
| July CPI (forecast) | 2.9% |
| June CPI (actual) | 2.6% |
| Energy price‑cap increase | +13% (£221 annual rise) |
| Expected inflation impact from cap | +0.5 percentage points |

## Energy price‑cap hike drives the rebound  
Ofgem’s decision to raise the household gas and electricity cap by 13% in July pushes the average annual bill to £1,862, up £221 from the previous level [2][3]. Investec economist Ellie Henderson estimates this alone adds about 0.5 percentage points to the CPI reading [2][3]. RSM chief economist Thomas Pugh notes the same uplift, estimating a 0.44‑point contribution, partially offset by falling motor‑fuel prices [1]. The surge comes amid ongoing volatility from the Iran‑related war in the Middle East, which continues to pressure global oil markets and, by extension, UK energy costs [1].

## Market and policy implications  
The higher inflation reading threatens the Bank of England’s 2% target. The central bank, which kept its policy rate at 3.75% last month, is already signaling the possibility of a rate rise as early as September if inflation proves “sticky” [1]. City investors price in roughly a 25‑basis‑point hike by year‑end, with a one‑in‑four chance of an increase at the September meeting [1]. Meanwhile, the government’s Great British Summer Savings Scheme—VAT cuts on family attractions and children’s meals—offers only modest relief, expected to shave about 0.1 percentage point off headline inflation [1].

## What to watch
- **July CPI release (Wednesday)** – confirms whether the 2.9% forecast materialises.  
- **Bank of England policy meeting (September)** – any rate change will reflect the inflation trajectory.  
- **Energy market developments** – further spikes in oil or gas prices could push inflation higher, while any easing in motor‑fuel prices may temper the rise.

The July CPI will test whether the recent dip in inflation was a temporary blip or the start of a new upward trend, shaping both monetary policy and household budgets for the rest of 2026.

## Sources
1. Theguardian — [New UK cost of living crisis looms with soaring energy bills forecast to lift inflation | UK cost of living crisis | The Guardian](https://www.theguardian.com/business/2026/aug/16/new-uk-cost-of-living-crisis-looms-rising-energy-bills-inflation)
2. Nation — [UK inflation expected to surge as higher energy bills bite](https://nation.cymru/news/uk-inflation-expected-to-surge-as-higher-energy-bills-bite/)
3. Oilprice — [UK Inflation Set to Rebound as Energy Bills Surge | OilPrice.com](https://oilprice.com/Energy/Energy-General/UK-Inflation-Set-to-Rebound-as-Energy-Bills-Surge.html)

---
Cite as: TrendWatcher, "UK inflation expected to rise to 2.9% in July as energy bills jump", https://www.trendwatcher.in/article/34e358ab-f1de-45e9-a83d-a9746413f401