UK Inflation Rate Falls To 3% In Year To January

UK inflation rate falls to 3% in year to January
Britain’s annual consumer price inflation (CPI) slowed sharply to 3.0% in January 2026, down from 3.4% in December 2025, according to the Office for National Statistics (ONS). This is the lowest inflation rate since March 2025 and broadly in line with economists’ forecasts.Petrol prices fell significantly in January.
Airfares have eased after rising late last year.
ONS chief economist Grant Fitzner noted motor fuel and transport costs were major downward contributors.
The inflation rate for food and non-alcoholic beverages eased, with staples such as bread, cereals and meat rising more slowly year on-year. Some costs like hotel stays and takeaways still nudged prices higher but were outweighed by declines in other areas.
Overall, prices are still rising the inflation rate is lower, not negative meaning the cost of living continues to increase but at a slower pace. Core inflation (excludes food, energy, alcohol & tobacco) eased to about 3.1%, the lowest since 2021.
Services inflation a key domestic pressure gauge remains elevated around 4.4%, signalling that some price pressures are still sticky.
The slowdown strengthens the case for the Bank of England (BoE) to cut interest rates. A near-unanimous view among markets is that the BoE could reduce its benchmark rate from 3.75% to 3.5% as soon as March 2026, or even later in the year if inflation continues to ease. UK economic growth has been weak, with barely any expansion in late 2025 supporting calls for easier monetary policy. Unemployment has ticked higher, strengthening the argument for stimulative action.
Slower inflation means your money stretches further than it would with higher inflation everyday prices rising more slowly.
Some sectors, like fuel and food, may feel the most relief at the till.
Mortgage rates and loan costs could fall, reducing monthly payments. Even with easing inflation, wages growing faster than prices still matters if wages rise modestly while prices rise more slowly, real spending power improves. The BoE’s long-term inflation target is 2%. At 3%, inflation is closer but not there yet, so further moderation is expected rather than guaranteed in 2026.
From the Office for National Statistics (ONS):
CPI inflation: 3.0% in the 12 months to Jan 2026 (down from 3.4% in Dec). CPIH (including owner occupiers’ housing costs): 3.2% on the year. Monthly CPI: fell 0.5% in January.
Transport and food were the biggest downward contributors.
Economists forecast inflation continuing to gently trend down toward the BoE’s 2% target later in 2026 especially if wage pressures and utility price increases weaken.