UK inflation dropped to a nearly one-year low of 3% in January as the pace of price increases continued to slow. This marks the lowest inflation level since March 2025, down from 3.4% in December, aligning with economists’ expectations.
The Office for National Statistics (ONS) attributed the decrease in inflation to lower petrol and food prices, along with reduced airfares. Inflation had surged to 3.8% the previous year, hitting a peak of 11.1% in October 2022.
The Bank of England anticipates inflation to approach its 2% target by mid-2026. The latest data indicates core inflation, excluding volatile components like energy and food, stood at 3.1% in January, slightly lower than December’s 3.2%.
The decline in inflation has raised prospects of another interest rate cut in March. Notably, the base rate currently stands at 3.75%. Experts suggest that with a challenging labor market, sluggish economic growth, and stable inflation, a rate cut is likely at the upcoming meeting in March.
Lower petrol and food prices were key factors driving the inflation reduction. The average petrol price dropped by 3.1p per liter from December 2025 to January 2026. Meanwhile, food and non-alcoholic drink prices saw a 3.6% increase year-on-year in January, down from 4.5% in December.
The Chancellor emphasized the government’s commitment to addressing the cost of living, with recent measures such as energy bill reductions and freezes on rail fares and prescription fees. The aim is to ease financial burdens on households and stimulate growth across the country.
The ONS highlighted that lower petrol prices and reduced airfares were significant contributors to the decline in inflation. Additionally, lower food prices, particularly for bread, cereals, and meat, played a role in pushing inflation down. However, expenses related to hotel stays and takeaways partially offset these decreases.
In summary, the latest ONS data confirms a 3% inflation rate in January, in line with economists’ forecasts. As inflation moderates, it indicates that while prices are still rising, the rate of increase has slowed down, contributing to a more stable economic environment.