UK inflation falls to 3% in January

(Sharecast News) - UK inflation fell to its lowest level in nearly a year in January, according to figures released on Wednesday by the Office for National Statistics, making a rate cut in March more likely. The consumer price index declined to 3% from 3.4% in December, coming in as expected and marking the lowest rate of annual inflation since March 2025.

Food and non-alcoholic beverages prices rose 3.6% in January, down from 4.5% in the 12 months to December 2025, while services inflation fell to 4.4% from 4.5%.

Core inflation - which excludes energy food, alcohol and tobacco - rose 3.1% in the 12 months to January, down from 3.2% in December and the lowest rate since September 2021, when it was 2.9%.

ONS chief economist Grant Fitzner said: "The cost of raw materials for businesses fell over the past year, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed."

Fitzner added: "Airfares were another downward driver this month with prices dropping back following the increase in December. Lower food prices also helped push the rate down, particularly for bread and cereals and meat. These were partially offset by the cost of hotel stays and takeaways."

Martin Sartorius, lead economist at the Confederation of British Industry, said: "January's slowdown in inflation, alongside cooling labour market conditions, increases the likelihood that the Monetary Policy Committee will cut rates again over the next couple of months. Beyond then, the scope for further Bank Rate reductions will become more limited, as the Committee looks to ensure that inflation returns sustainably to the 2% target."