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.

The largest downward contributions to CPI inflation came from the transport, food and non-alcoholic beverages, and education divisions.

Chief savings officer at Nottingham Building Society, Harriet Guevara, said: "Today’s data showing inflation falling to 3% is another clear sign that price pressures are continuing to ease.

"A sustained move down in inflation is an important signal for borrowers, as it increases the likelihood of those rate cuts. Markets are already factoring in cuts over the coming months, and further evidence that inflation is cooling would add to that momentum."

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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