Official CPI rose in the year to July after months of cooling. Bank Rate remains 3.75% ahead of the 17 September MPC announcement, with energy volatility still the main uncertainty for pricing and borrowing costs.
UK consumer price inflation moved higher again in July, according to the Office for National Statistics (ONS). The Consumer Prices Index (CPI) rose by 2.9% in the 12 months to July 2026, up from 2.6% in June. The broader CPIH measure, which includes owner-occupiers’ housing costs, rose by 3.1%, up from 2.8%.
That was the first increase in the CPI 12-month rate since March 2026. On a monthly basis, CPI rose by 0.3% in July 2026, compared with a 0.1% rise in July 2025. Core CPI (excluding energy, food, alcohol and tobacco) was 2.6%, unchanged on the month. Services inflation eased slightly to 3.4%; goods inflation rose from 1.7% to 2.2%.
The ONS points to energy, particularly gas and electricity, as a large upward contribution to the change in the annual goods rate, partly offset by lower motor fuel prices on the month. Average diesel stood at 167.6p a litre in July and petrol at 152.2p, both lower than in June. Housing and household services remained a major contributor to the annual rate. Restaurants and hotels inflation was 4.0% in the year to July.
These are still above the Bank of England’s 2% CPI target. August CPI is due on 16 September 2026; that release will land the day before the next Monetary Policy Committee (MPC) decision.
Bank Rate held at 3.75% – next call on 17 September
At its meeting ending on 29 July 2026, the MPC voted 6–3 to maintain Bank Rate at 3.75%. Three members,Megan Greene, Catherine L Mann and Huw Pill, preferred a 0.25 percentage-point rise to 4%. The majority judged that holding Bank Rate, together with tighter financial conditions since the Middle East conflict intensified, provided enough insurance for now against upside risks from energy prices, while leaving room to act later if second-round effects in wages and prices appeared.
The Bank’s public explanation is clear: inflation had fallen further than expected (to 2.6% at the time of the July decision), but higher and more volatile energy prices linked to the Middle East conflict were expected to push inflation up again later in 2026. Monetary policy cannot set global energy prices; the MPC’s job is to stop any rise becoming persistent.
Governor Andrew Bailey said rates were “at about the right level” for now. The next Bank Rate announcement, with the Monetary Policy Summary and minutes, is scheduled for Thursday 17 September 2026 at noon. That meeting is not a full Monetary Policy Report round, so there will be no new staff forecast package with the decision.
Uncertainty flag: Markets and commentators disagree on whether September brings a hold, a cut or (less commonly argued) a hike. Official sources do not pre-commit. Firms should treat any private-sector “expectation” of a move as a forecast, not a fact.
Domestic energy costs into autumn
Separately, Ofgem confirmed on 26 August 2026 that the domestic energy price cap for 1 October–31 December 2026 will rise by about 4% for a typical dual-fuel Direct Debit household, reflecting higher wholesale gas prices. From 1 October 2026 to 31 March 2027, the government has set VAT on qualifying domestic electricity at 0% (from 5%). Ofgem and HM Treasury state that this also helps some small businesses already eligible for the reduced domestic VAT rate; most non-domestic contracts remain outside the household price cap and are priced commercially.
That mix – still-elevated wholesale gas, a modest domestic cap rise, and a temporary electricity VAT cut for eligible users, matters for household budgets and therefore for local footfall, even where a firm’s own meter is on a business tariff.
What it means for Colchester and Essex firms
Retail and hospitality. Higher CPI and still-sticky services and catering inflation keep pressure on input costs and on customers’ real spending power. Colchester city centre, district centres and coastal leisure spots (West Mersea, Clacton and beyond) are exposed to discretionary spend. Menu and shelf-price decisions remain a trade-off between margin and volume; there is no official local sales series in this release to quantify the effect.
Construction and property-related trades. Bank Rate at 3.75%, with financial conditions tighter than before the energy shock, sustains higher borrowing and refinancing costs for developers, contractors and households renewing mortgages. That can slow project starts and private residential demand even when labour is available. The July minutes explicitly noted higher interest rates faced by households and firms since the conflict.
Logistics and motor-dependent businesses. July’s dip in pump prices offered some relief on the month, but the Bank still flags energy as volatile. Fleet operators and last-mile firms around the A12, Haven ports hinterland and distribution parks should budget for swings rather than a one-way fall.
SMEs and working capital. Overdraft, invoice finance and commercial mortgage rates typically track Bank Rate with a lag and a margin. A hold through September keeps the cost of capital roughly where it has been since late 2025; a surprise hike would raise it further. Cash-flow buffers matter more while inflation remains above target and energy uncertain.
Practical watch-list (not advice). Track the 16 September ONS CPI release and the 17 September MPC announcement; review energy contract renewal dates before the October domestic cap change; and re-check price lists where restaurants/hotels-style cost inflation remains elevated. None of these data releases forecasts Colchester-specific turnover.
