Inflation falls to lowest level in almost a year in boost to households

INFLATION has fallen to the lowest level in almost a year, latest official figures show.

Rates were at 3% in the year to January, the Office for National Statistics (ONS) said today – with the drop driven by cheaper petrol prices, food and airfares.

It marks a sharp fall from December, when rates rose for the first time in six months to 3.4%.

Economists had predicted that Consumer Prices Index (CPI) inflation – the rate at which the cost of goods and services is rising – would fall in January.

ONS chief economist Grant Fitzner said: “Inflation fell markedly in January to its lowest annual rate since March last year, driven partly by a decrease in petrol prices.”

The average price of petrol fell by 3.1p per litre between December 2025 and January 2026.

He 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.”

Figures show the rate of price rises for food and non-alcoholic drinks fell to 3.6% in January, down from 4.5% in December.

The Bank of England (BoE) has forecast that inflation will fall to its 2% target by mid-2026, partly due to cost of living support announced by the government in the November Budget.

Today’s figures will come as a welcome boost to Labour, who have pledged to bring down costs for British households.

Chancellor Rachel Reeves said: ”Cutting the cost of living is my number one priority.

“Thanks to the choices we made at the budget we are bringing inflation down, with £150 off energy bills, a freeze in rail fares for the first time in 30 years and prescription fees frozen again.

“Our economic plan is the right one, to cut the cost of living, cut the national debt and create the conditions for growth and investment in every part of the country.”

However, it comes just a day after the UK’s unemployment hit its highest level in almost five years.

The jobless rate hit 5.2% in the three months to December – up from 5.1%.

What it means for your money

Inflation, also known as CPI, measures the rate at which the cost of goods and services is rising or falling.

It impacts your spending power and how far your money can go.

Rising inflation means prices are rising at a faster rate, pushing up grocery and household bills.

On the other hand, falling inflation is good news for households as it means price rises are slowing.

Inflation also affects what happens with interest rates set by the Bank of England, which can influence mortgage, savings and credit card rates.

They are currently at 3.75%, but it is hoped they could fall as early as next month.