Consumer price index (CPI) inflation has fallen to 3% in the 12 months to January, from 3.4% at the end of 2025, the Office for National Statistics (ONS) has revealed.

Analysts have stated that this drop could signal a cut to the Bank of England's base rate next month.

Month-on-month, CPI inflation shrunk by 0.5%, compared to growth of 0.4% in December.

The ONS stated that the decline in the inflation rate reflected downward contributions from six divisions, partially offset by upward contributions from four divisions.

Chief investment strategist at Hargreaves Lansdown, Emma Wall, stated: "Lower fuel and airfares helped ease pricing pressures, as did slower inflation for food and non-alcoholic drinks. Core inflation, which excludes the often-volatile prices of food, energy and alcohol also fell on the previous month, as did services inflation, which has been sticky on the last year.

"These measures moving in tandem suggests that the outlook from here will be lower inflation, and the Bank of England expects inflation to fall to the target of 2% this year. The welcome news comes following yesterday’s weaker jobs data, meaning a March rate cut now looks certain."

Regional director at deVere, James Green, added that the latest data gives the Bank of England "no credible reason to delay" a cut to the base rate, which currently sits at 3.75%.

The Monetary Policy Committee will convene on 19 March to decide whether to cut or remain with the current base rate.

Green concluded: "The Bank has already reduced rates six times since mid-2024 as inflation fell from double-digit peaks toward target. Yet the rate path should not just be reactive; it should reflect incoming evidence. January’s inflation report, combined with weakening employment and wage dynamics, gives the MPC the facts it needs to cut when it next meets.

"Monetary policy operates with a lag. The cumulative impact of past tightening is already discouraging demand. Holding rates too high now risks choking growth just as price pressures loosen - that would be bad policy and worse economics."

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