Inflation falls to 3% in January

The annual rate of inflation fell to 3% in the 12 months to January 2026, helped by falling petrol and food prices, according to latest data released by the Office for National Statistics (ONS).

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.2% in the 12 months to January 2026, down from 3.6% in December.

Transport, food and non-alcoholic beverages provided the largest downward contributions to the monthly change in both the CPIH and CPI annual rates. Prices in the transport division rose by 2.7% in the year to January 2026, a significant drop from the 4.0% recorded in the previous month.

Motor fuel prices fell by 2.2% in the 12 months to January 2026. Average petrol prices stood at 133.2 pence per litre, down from 137.1 pence a year earlier.

Air fares also contributed to the decline. The index followed a conventional seasonal pattern of rising into December and falling sharply into January.

Meanwhile, food and non-alcoholic beverage prices rose by 3.6% in the 12 months to January 2026, down from 4.5% in the 12 months to December 2025. Six out of 11 food classes saw downward effects, including bread and cereals, meat, and dairy products. Monthly food prices fell by 0.1% in January.

Education inflation slowed to 5.1% from 7.6%. This was driven by private school fees, which remained unchanged in January following a 12.7% rise a year ago.

Housing and household services inflation eased to 4.2%. Gas prices fell by 2.7% in the 12 months to January, compared with a 2.1% rise in December.

Electricity prices also provided a counteracting upward effect, rising by 5.3% in the year to January 2026 following a change in the energy price cap.

An Office of Gas and Electricity Markets (Ofgem) spokesperson said: “For an average household paying by direct debit for dual fuel, this equates to an annual bill of £1,758.”

Commenting on the figures for 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.  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 & cereals and meat. These were partially offset by the cost of hotel stays and takeaways.

“The cost of raw materials for businesses fell over the past year, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed.”