Updated: August 18, 2026
UK households are heading into an important week for the cost of living, with economists expecting inflation to rise again as July’s sharp increase in household gas and electricity prices begins to feed into official figures.
Consumer Prices Index inflation is forecast to reach around 2.9% in July, up from 2.6% in June. The Office for National Statistics is due to publish the confirmed figure on Wednesday, 19 August 2026, meaning the 2.9% figure remains an economist forecast rather than an official reading.
A rise to 2.9% would move inflation further above the Bank of England’s 2% target and reverse part of the improvement seen earlier in the summer. The latest pressure is being driven heavily by energy rather than an across-the-board acceleration in prices.
Ofgem increased its household energy price cap by 13% from 1 July. For a typical dual-fuel household paying by direct debit, the increase has added fresh pressure to household budgets during the July-to-September period.
UK inflation faces fresh energy pressure as oil climbs above $90
For households on standard variable tariffs paying by direct debit, average electricity prices between July and September are around 26.11p per kWh, alongside a daily standing charge of 57.19p. Gas averages 7.33p per kWh, with a standing charge of 29.04p a day. Actual rates vary by region and payment method.
The energy price cap is not a maximum total household bill. It limits the amount suppliers can charge per unit of gas and electricity and for standing charges, meaning households that use more energy will still pay more. Customers on fixed-price tariffs are generally protected from the July cap increase until their existing deals expire.
Another energy risk has emerged just before the inflation release. Brent crude climbed above $90 a barrel on Tuesday, 18 August, reaching around $91.60 as renewed tensions involving Iran increased concerns about Middle East supplies. If higher oil and gas prices persist, they could add pressure to petrol, transport, manufacturing and household energy costs later in the year.
The Bank of England already expects the direct contribution from energy prices to CPI inflation to increase during 2026. Its latest projections show headline inflation averaging around 3.2% in the final quarter of the year, with inflation projected to reach about 3.2% in October and November before easing slightly.
Food prices could also become a growing source of pressure. Higher energy and transport costs can work their way through farming, food manufacturing, distribution and supermarkets. Food and other goods inflation could therefore become a more important part of the overall increase in living costs later this year.
However, there are signs that domestic inflation pressure may be becoming less intense. New labour-market figures released on 18 August showed total UK earnings growth slowing to 4.1%, while private-sector pay growth weakened to around 2.8%. The unemployment rate stood at about 4.9%, while vacancies fell to approximately 712,000.
The combination matters for households because weaker wage growth alongside higher inflation can squeeze real incomes. At the same time, a softer labour market may reduce the need for the Bank of England to respond aggressively to an inflation rise driven mainly by imported energy costs.
Bank of England rates and the next energy cap are now in focus
The Bank of England kept Bank Rate at 3.75% at its July meeting after a 6–3 vote. Three Monetary Policy Committee members preferred an immediate 0.25 percentage-point increase to 4%. The Bank’s next interest-rate decision is scheduled for 17 September 2026.
Policymakers now face a difficult balance. Higher energy costs and another rise in inflation could strengthen the case for keeping monetary policy tight, while weaker private-sector wage growth, falling vacancies and a softer labour market point in the opposite direction.
The Bank has made clear that future interest-rate decisions will depend on whether the energy shock creates more persistent inflation across wages and prices. Its central projections still expect inflation eventually to move back towards the 2% target.
For mortgage borrowers, the effect can arrive before an official Bank Rate change. Expectations about future rates influence bond yields and swap rates used by lenders to price fixed-rate mortgage deals.
Our analysis of the Bank of England’s 3.75% interest-rate decision and inflation risks looks at the challenge facing policymakers as energy prices and inflation move higher.
Households will soon get another major indication of future energy costs. Ofgem is due to announce the price cap covering 1 October to 31 December 2026 by 26 August. The new level will take effect on 1 October and could have a significant influence on household budgets through the colder months.
EES Border Checks for Brits: What Changes From September 6
New School Uniform Rules From September 2026: What Parents Need to Know
The immediate focus is now on Wednesday’s July CPI release. A reading around 2.9% would represent a noticeable increase from June’s 2.6%, although economists will also examine services inflation and other underlying measures to determine whether the rise extends beyond energy.
The outlook has also become more sensitive to events in global energy markets. Oil prices above $90, higher household gas and electricity costs and the possibility of further disruption in the Middle East mean inflation could remain elevated for longer than households had hoped.
For families, the next two dates are particularly important: 19 August, when July inflation is published, and 26 August, the deadline for Ofgem’s next energy price-cap announcement. Together, the figures will offer a clearer picture of how much pressure household finances could face heading into autumn and winter.
Make Swikblog your go-to source on Google for reliable updates, smart insights, and daily trends.
