The inflation rate in the UK dropped to 3% in January, marking a nearly one-year low as the pace of price increases continued to slow down. This figure represents the lowest level of inflation since March 2025, down from 3.4% in December, a decline that was widely anticipated by economists.
Despite the decrease in inflation, prices are still on the rise, albeit at a slower rate. The Office for National Statistics (ONS) attributed the decline in inflation to lower petrol and food prices, along with reductions in airfares.
Last year, inflation peaked at 3.8%, while the highest recorded inflation rate was 11.1% in October 2022. The Bank of England has projected that inflation will approach its 2% target by mid-2026.
The recent inflation data has raised expectations for a potential interest rate cut in March, with the current base rate at 3.75%. Analysts predict that the upcoming meeting in March may lead to the first rate cut of 2026, given the challenging economic conditions.
The decline in inflation was primarily driven by lower petrol and food prices. Petrol prices fell by 3.1p per litre between December 2025 and January 2026, while food and non-alcoholic drink prices rose by 3.6% in the 12-month period to January 2026.
Core inflation, excluding volatile elements such as energy, food, alcohol, and tobacco, stood at 3.1% in January. The Chancellor emphasized the government’s commitment to reducing the cost of living, mentioning various measures taken to address inflation concerns.
Grant Fitzner, Chief Economist at the ONS, highlighted the key factors contributing to the decline in inflation, including lower petrol prices, reduced airfares, and decreased food prices. The ONS determines inflation based on a basket of goods and services that reflect consumer spending patterns.