In January, UK inflation dropped to 3%, the lowest level in almost a year, showing a continued easing in price increases from the previous month. This figure is a decrease from 3.4% in December and the lowest since March 2025, in line with expectations from economists.
The decline in inflation does not indicate that prices have stopped rising, but rather that the rate of increase has slowed down. The Office for National Statistics (ONS) attributed this decrease to lower petrol and food prices, as well as a reduction in airfares.
Last year, inflation peaked at 3.8%, with the highest recorded increase reaching 11.1% in October 2022. The Bank of England anticipates that inflation will approach its 2% target by mid-2026.
Following the latest inflation update, there is speculation about a possible interest rate cut in March, as the current base rate stands at 3.75%. Analysts like Jonathan Moyes from Wealth Club predict a rate cut at the upcoming meeting in March due to various economic factors.
The ONS highlighted that lower petrol and food prices significantly influenced the decrease in inflation. Specifically, petrol prices dropped by 3.1p per litre between December 2025 and January 2026.
Regarding core inflation, which excludes volatile elements like energy and food, the rate stood at 3.1% in January, slightly lower than the 3.2% reported in December.
The Chancellor responded to the latest inflation data, emphasizing efforts to reduce the cost of living through various measures implemented in the budget. The aim is to bring down inflation while providing relief to households.
Grant Fitzner, Chief Economist at the ONS, explained that the decrease in inflation was primarily driven by lower petrol and airfare prices in January. Additionally, reduced food prices, particularly for bread and meat, contributed to the overall decline.
Inflation is a measure of how the prices of goods and services change over time, reflecting the impact on consumer purchasing power. The ONS tracks inflation using a basket of goods and services that represent typical household expenditures.