Inflation RISES to 2.9% in July – What Does It Mean For Your Money?

UK inflation rose to 2.9% in the year to July up from 2.6%, according to the latest data from the Office for National Statistics (ONS), but what does it mean for your money?

Higher energy bills drove inflation to the highest rate in four months this July, new ONS figures show.

Energy costs surged after conflict in the Middle East restricted global oil supplies.

It follows a 13% increase in the energy price cap on 1 July 2026 which added £221 per year to the typical household bill.

The energy price cap, which is determined by the regulator Ofgem, sets the maximum amount that suppliers can charge households for each unit of gas and electricity they use.

Households are forecast to see energy bills rise again by 4% in October due to ongoing international tensions, according to analysis from Cornwall Insight. This would be the highest level seen since July 2023.

Your shopping basket just got 2.9% more expensive

Inflation measures the increase of goods and services over time. That includes your food shopping, clothing, bills and other services.

Since the rate of inflation is now 2.9%, it means that the same food, fuel and energy that cost you £100 a year ago now costs £102.90.

Gas prices jumped 14.7% last month, the sharpest rise since October 2022. That single jump is the main reason UK inflation just climbed to 2.9%, up from 2.6%.

Despite general price rises,  diesel actually got cheaper, dropping by almost 9 pence a litre.

What does this mean for interest rates?

Currently, the Bank of England’s target is to keep inflation at 2% and it uses interest rates to try to control inflation levels.

Increasing interest rates makes borrowing and spending more expensive, which reduces the demand for goods and slows prices down.

The UK’s base rate has been kept the same at 3.75% since December 2025. Since inflation rose to 2.9% in July, its highest rate in 4 months, an increase in interest rates could be more likely.

Interest rates influence the cost of borrowing, such as the interest you pay on mortgages, loans and credit cards. If the base rate increases, it’s unlikely that mortgage rates will become cheaper in the short term.

How to protect your spending power

With inflation on the rise, it’s more important than ever to protect the value of your money.

Ensuring that your cash and savings are held in an account paying above the current level of inflation can help ensure you preserve your spending power.

Our round-up of the best savings accounts and best Cash ISAs reveals the top-paying accounts available now.

If you’re on a variable rate mortgage or thinking about remortgaging, today’s figures are a signal that rate cuts may take longer to arrive than hoped.

Speaking to a mortgage broker can help you effectively plan the best steps to finding a good value mortgage deal.

With energy bills likely to rise again this autumn, ensuring you secure the best value tariff is essential to keep costs down. Where possible, switching to a fixed-rate energy deal can help reduce the impact of an energy price cap increase on your budget.