Inflation falls to lowest level since March 2025

The annual rate of inflation fell to 3.0% in January 2026, according to the latest figures published by the Office of National Statistics (ONS), its lowest level since March 2025.

The latest Consumer Price Index data from the ONS revealed that the fall in inflation was largely driven by a slow-down in price rises of food and drink, with some products, including butter, cheese and rice, slightly cheaper on average than in December.

Other factors bringing down inflation include fuel prices, with the average price of petrol fell by 3.1 pence per litre between December 2025 and January 2026. Diesel prices have also seen a similar fall, down 3.2 pence per litre.

Looking ahead, inflation is expected to continue to fall into 2026 in line with previous forecasts. Economist anticipate the slowdown in food and drink price rices to continue as global food prices are expected to fall through 2026. Household energy costs are set to fall in April under the Ofgem price cap.

Despite the fall in inflation, the UK continues to see faster price rises than its European neighbours. Germany has reported 2.1% inflation for January 2026, while France saw prices rise just 0.4%.

The ONS’s publication January 2026 inflation data has also raised the odds that the Bank of England will lower interest rates at its next Monetary Policy Committee meeting. While the 3.0% rate of inflation recorded falls slightly short of the bank’s own forecast, the downward trend is back towards the bank’s 2% inflation target and indicates the economy is largely behaving as had been predicted. A slow down in wage growth, another key factor that has supported higher rates of inflation, also gives further cause for the Bank of England to reduce lending costs to stimulate economic growth.