Britain’s annual inflation rate slowed to 3.0 percent in January, meeting market expectations and strengthening the case for a potential interest rate cut next month.
According to the Office for National Statistics, the Consumer Prices Index declined from 3.4 percent in December to 3.0 percent in January.
Grant Fitzner, chief economist at the ONS, said the drop was partly driven by lower petrol prices, bringing inflation to its lowest annual rate since March last year.
The data aligns with guidance from the Bank of England, which expects inflation to cool toward its two-percent target in the coming months as energy bills ease.
The Bank earlier held its benchmark interest rate at 3.75 percent but signalled further rate cuts could follow if price pressures continue to moderate.
Official figures show UK unemployment has risen to a five-year high of 5.2 percent, while wage growth has slowed in the private sector but remains elevated in the public sector.
Prime Minister Keir Starmer’s government has faced challenges reviving economic growth since taking office in July 2024.
Finance minister Rachel Reeves said government budget decisions had helped bring inflation down.
The Bank of England now forecasts economic growth of 0.9 percent this year and 1.5 percent in 2027, lowering earlier projections.
Analysts say weakening labour market conditions could make policymakers more comfortable cutting rates as 2026 progresses.
