Kevin Peachey
Cost of living correspondent

Many analysts aren’t expecting a change in interest rates by the Bank of England despite inflation heading further from its 2% target.

But, even if the base rate stays at 3.75%, savings providers and mortgage lenders shift their own rates on a fairly regular basis.

Yesterday, Treasury-backed National Savings and Investments (NS&I) announced it will change its prize rate on Premium Bonds in September.

This hugely popular savings product doesn’t pay interest. Instead, the chances of winning get better.

But don’t get too excited. The odds of winning have only shortened from 22,000 to one, to 21,000 to one.

Dearbail Jordan
Senior business and economics reporter

One of the more surprising - and welcome - points in today's data is that food price inflation in July was the lowest since September 2021.

But that may not last.

"It could be the lull before the storm," says Susannah Streeter, chief investment strategist at advisory firm Wealth Club. "Worries are intensifying that prolonged heat and drought across the UK and Europe are threatening crop yields, with concerns over supplies of cereals, fruit and vegetables."

She adds: "If shortages build, higher agricultural costs could eventually feed through to supermarket shelves, putting renewed pressure on food prices later this year and into 2027."

Priya Patel
Economics correspondent

Rose Jennifer Harvey is a pensioner who uses the Second Chance Medway community hub to manage her food bills.

She says it's hard because other things are still going up.

"My main utility bill is my electric, which goes up and down like a blooming yo-yo," she says.

"As my direct debits come out, I have to make sure I’ve got enough from my pension to cover them. It throws you out all over the place, so you have to work everything out.

"As you get older, with food prices going up like they have, and you’ve still got your utility bills to pay, things can become a struggle. I find that I have to think much more carefully and put a certain amount away to cover everything.

"I’m sure lots of people my age have to do that, and families too. I honestly don’t know how some of them manage from one month to the next."

Kevin Peachey
Cost of living correspondent

Higher domestic energy prices are the driving force in the latest inflation figures. The cost of each unit of energy rose by 13% under regulator Ofgem's price cap at the start of July.

But before and since, the country has been gripped by a heatwave. The idea of finding ways to save on heating feels a distant concern.

Experts say people should remind themselves of good habits – blocking draughts, taking short showers, locating the key to bleed radiators.

Energy suppliers offer a host of support schemes to anyone struggling to pay, or who is likely to find it difficult.

The trade body for the sector, Energy UK, has a list of these schemes, external. But it stresses that companies can often only help if you get in touch with your supplier to tell them you are unable to pay.

Dearbail Jordan
Senior business and economics reporter

Image source, Getty Images

In an interesting turn of phrase, the ONS says that one area where food price growth has slowed is for "meat of cows" - or as everyone else might call it "beef".

Prices for beef and veal rose by 2.5% in the year to July, down from 5.1% in the 12 months to June.

The statistics office also said that breaded chicken contributed to an overall slowdown in food price inflation which hit 1.3% in the 12 months to July, the lowest in nearly five years.

What the inflation rate could mean for interest rates and mortgagespublished at 08:27 BST

08:27 BST

Dharshini David
Deputy economics editor

Among the bills many households have to contend with are mortgages and rent - so where do the latest inflation figures leave the Bank of England?

Remember, interest rate changes take a while to impact prices, with the Bank setting rates to influence future inflation.

And there is little in these figures to change its belief that, in the medium term, inflation will come down to its 2% target.

Actually, the fact that the likes of food inflation has remained muted may give it hope price pressures remain fairly contained.

Yesterday’s flat jobs and moderate wage growth figures also may lead the Bank to think that firms have little opportunity to get away with hiking up prices.

That’s why some economists think rates may not rise this year after all.

But there are still risks of a rise - if inflation does rise by more than analysts expect later in the year, or if the war Iran drags on, threatening more upheaval for energy costs.

A reminder: Interest rates are a key tool the Bank of England can use to keep inflation on track with its 2% inflation target. It can raise interest rates to reduce inflation, and lower them to stimulate growth.

Housing Secretary Angela Rayner says "it's always a concern when inflation increases", as she reacts to the latest figures when speaking to BBC Breakfast.

Rayner says tackling inflation "has been a focus" of the Labour government, and lists measures set out by Prime Minister Andy Burnham including VAT cuts on electricity bills and a bus fare cap.

She cites the impact of the war in the Middle East as raising price rates for goods globally, due to the fact shipping through the crucial Strait of Hormuz waterway remains at lower levels than before the conflict began.

"What the prime minister is relentlessly focused on at the moment is how we can help families and help people who at the moment see not enough wage at the end of their month because their everyday costs are going up," she adds.

Kevin Peachey
Cost of living correspondent

Today’s figures will again focus everyone’s mind on how much we are paying for goods and services.

But the way we pay is changing too.

An annual report, published today by banking trade body UK Finance, shows that we are increasingly pulling our smartphones out of our pockets when we get to the till in a shop or café.

Two-thirds of adults were registered to use a mobile wallet last year, the data shows. Those in the 20s and 30s are the most likely, but older age groups are catching up.

Yet, that doesn’t mean cash is dead. In fact, the pace of decline is slowing when it comes to the proportion of payments made with notes and coins.

Why? One reason is that many people find it easier to budget with cash when money is tight.

Dearbail Jordan
Senior business and economics reporter

Price growth at the pump slowed in the year to July, the ONS said, keeping a lid on the overall rate of inflation.

Motor fuel price rises eased to 15.5% compared to an increase of 21.3% in the 12 months to June. This was mainly because of diesel, according to the ONS, although petrol price growth also slowed.

However, the cost of filling up a motor last month was still much higher than it was in 2025.

The ONS says the average price of diesel was 167.6p per litre in July 2026. Last year, it was 143.3p, according to the RAC motoring organisation.

For petrol, the average price was 152.2p per litre last month. Last year, it was 135.7p, RAC data shows.

Everyone has their own inflation ratepublished at 07:42 BST

07:42 BST

Kevin Peachey
Cost of living correspondent

Remember, today’s figures cover a lot of goods and services. There are 760 in the virtual inflation basket used in calculations by the Office for National Statistics.

Of course, individuals don’t buy all those items.

So, your own personal inflation rate depends on the purchases you make and the services you use.

That’s why the price of food and fuel are so crucial. They are essentials, bought by everyone. And, for those with smaller incomes, that takes up a bigger chunk of what you have to spend.

Image source, PA Media

Conservative shadow chancellor Mel Stride says prices are "accelerating once again" under Labour.

"We left inflation bang on the 2% target, now it has been above that level for 22 months in a row," he writes on X.

"Labour’s mismanagement has left us unprepared for global shocks. It is ordinary people who are left paying the price."

Dearbail Jordan
Senior business and economics reporter

As well as household energy bills contributing to the rise in inflation, furniture and household goods as well as clothing and footwear lifted the overall rate, according to the ONS.

It says that prices for furniture and household goods usually fall around this period. Not this time - in the year to July they rose by 1%.

It looks like people were investing on gardening and doing up their houses during the warm spell - prices rose for tools and equipment for the home and gardens. Inflation for goods and services for routine household maintenance also increased.

Meanwhile, inflation on clothing and footwear increased by 0.5% after falling in June. Retailers had brought forward their summer sales as there were fewer discounted items in July.

The ONS says: "Some recent media reports have also suggested that the warm weather in July led people to spend more on clothing than might otherwise have been the case."

Priya Patel
Economics correspondent

Penny Keevil founded crisis support centre Second Chance Medway which runs a discounted food pantry two days a week.

Speaking before today's announcement, Penny says the cost of living crisis is here to stay: "I think it’s going to get worse because of the weather and the pressure that puts on farmers."

"Energy bills are still far too high and wages and incomes aren’t keeping up. There will always be a need for food banks, community supermarkets and pantries to help families feed themselves affordably," she says.

Some people attend the food bank on a daily basis, she says.

"It’s not just people on benefits. It's working people, homeless people, people in part-time work, people on benefits and everybody in between. The need for affordable food now reaches across every part of the community."

Inflation rise more modest than some analysts feared earlier in the yearpublished at 07:28 BST

07:28 BST

Dharshini David
Deputy economics editor

Inflation felt the heat from higher gas prices earlier in the year, with the rise in the domestic energy bill price cap of July, pushing inflation up to close to 3% last month.

That is actually more modest than some analysts had feared earlier in the year - in part because price movements in other items from petrol have been more muted.

The pass through of higher energy costs hasn't materialised in items such as food; inflation there, at 1.3%, is at its lowest for close to five years.

Those pressures may yet build in the coming months as they’re passed through supply chains, and economists expect inflation to hit 3.5% later in the year.

That would still be a fraction of what was seen at the start of the war in Ukraine, and incomes for most - for now - are continuing to outpace prices.

But if the war in the Middle East drags on, the inflation rate could risk creeping higher.

Image source, Getty Images

UK Chancellor John Healey says the British economy is "resilient" as he reacts to the rise in the inflation rate.

"Iran war inflation continues to impact prices here at home, but Britain’s economy is resilient," he says.

"We have cut VAT on electricity bills and capped bus fares at £2 – to give breathing space to those feeling the strain," Healey adds.

"There is more to do to restore hope and build a stronger economy where prosperity is shared more fairly across Britain."

July's rise in the UK's inflation rate was driven by a "sharp increase" in fuel prices, according to Office for National Statistics (ONS) deputy director for prices Mike Hardie.

In comments shared by the ONS on social media, Hardie says that after the change to the energy price cap, "this was the largest rise in gas prices for almost four years".

He goes on to say that other upwards pressures on the inflation rate included furniture prices falling by less than usual, as well as reduced discounting meaning a smaller fall for clothing prices.

"The prices of raw materials and goods leaving factories slowed again, driven by a drop in the prices of crude oil and refined petroleum respectively."

Dearbail Jordan
Senior business reporter

Inflation for July is bang in line with financial market forecasts.

This is mainly because of energy regulator Ofgem's 13% increase in the price cap on household gas and electricity bills which came into force on 1 July.

The UK inflation rate has risen to 2.9% in the 12 months to July, the Office for National Statistics (ONS) has announced.

This compares to the rate of 2.6% announced last month for the year to June.