Finance · 20 August, 2026 · 2 min read
UK Inflation Jumps to 2.9% in July as Ofgem Raises Energy Price Cap 13%
UK annual inflation rose to 2.9% in July, driven by higher household energy bills. 13% increase in Ofgem energy price cap in July lifted average bills.
Whether the rise in inflation is tied to US-Israel vs US-Iran conflict.
4 of 5 outlets skipped it: cornwall Insight forecasts a 4% rise from October..
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BBC ties higher bills to a US-Israel-Iran war framing; Hürriyet cites the US-Iran war.
Inflation jumps on energy
UK inflation rose to 2.9% in the year to July, up from 2.6% in June, as higher household energy bills followed Ofgem’s 13% increase in the price cap.
“Gas prices soared at the sharpest pace in almost four years”
The BBC said gas prices “soared at the sharpest pace in almost four years,” pushing up the cap on household energy bills in July.B
Reuters reported that Britain’s inflation rate rose last month to its highest since March, driven by the 13% increase in the price cap set by the UK energy regulator Ofgem.
Bloomberg Línea said consumer prices rose 2.9% year over year versus a 15-month low of 2.6% in June, and tied the rebound largely to the 13% rise in the ceiling on regulated energy bills.
Policy debate and politics
The BBC said experts believed the inflation figure was unlikely to influence the Bank of England to change its key interest rate at its next meeting in September.B
In response to the data, Reuters quoted British Finance Minister Jeremy Hunt saying, "Inflation stemming from the Iran-related war continues to affect prices here, but the British economy remains resilient."
Bloomberg Línea said the Bank of England forecast a rebound to 2.8%, while also noting services inflation fell from 3.6% to 3.4% and core inflation held at 2.6%.
The BBC also reported that Chancellor John Healey said, "We have cut VAT on electricity bills and capped bus fares at £2 - to give breathing space to those feeling the strain," and that Shadow chancellor Mel Stride blamed Labour’s “mismanagement” for leaving ordinary people “paying the price.”B
What comes next
Economists cited by the BBC said energy-related costs were expected to push inflation higher over the coming months to a peak of about 3.5%.B
“expected to push inflation higher over the coming months to a peak of about 3.5%”
The BBC reported that Cornwall Insight forecast a 4% rise in energy bills from October, which would take them to the highest level since July 2023.B
Morningstar said the Bank of England will meet on Sept. 17, a day after the ONS’s next inflation data release covering August 2026, and noted that activity in derivatives markets had previously indicated a rate hike in November but now signaled no interest rate rises for the next three meetings.
The Guardian said the chancellor, John Healey, prepared for an October budget as rising inflation and higher borrowing costs complicated funding for Andy Burnham’s policy priorities, while Threadneedle Street warned a worst-case scenario could drive UK inflation to a peak of 4.5% by the middle of 2027.