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 December’s 3.4%. The decline was widely anticipated by economists.
The Office for National Statistics (ONS) attributed the decrease to lower petrol and food prices, as well as reduced airfares. Last year, inflation peaked at 3.8%, with the highest point reaching 11.1% in October 2022.
The Bank of England foresees inflation nearing its 2% target by mid-2026. The latest data showed core inflation, excluding volatile elements, at 3.1% in January, down from 3.2% in December.
The recent inflation update has sparked expectations of a potential interest rate cut in March, with the current base rate standing at 3.75%. Analysts predict that with a weakening labor market and subdued economic growth, the first rate cut of 2026 may occur at the next meeting in March.
Lower petrol and food prices were key factors driving the decrease in inflation. Petrol prices fell by 3.1p per liter from December 2025 to January 2026. Food and non-alcoholic drink prices rose by 3.6% in the 12 months to January 2026, down from 4.5% in the previous 12 months.
The Chancellor emphasized efforts to reduce the cost of living, citing measures such as energy bill reductions and freezing rail fares. The ONS highlighted that lower petrol prices and reduced airfares contributed significantly to the drop in inflation.
Inflation, which reflects changes in the prices of goods and services over time, is calculated by the ONS based on a basket of goods and services regularly updated to represent consumer spending trends.
