The UK's inflation rate decreased to 3% in January, down from 3.4% in December, according to the Office for National Statistics (ONS).
The ONS reported that the decrease was driven by lower food, fuel, and airfare prices. As reported by the BBC, economists believe this decrease raises the likelihood of the Bank of England cutting interest rates at its March monetary policy meeting.
The Bank of England's current key interest rate is 3.75%. The ONS chief economist, Grant Fitzner, stated that inflation fell markedly in January, driven partly by a decrease in petrol prices and airfares.
Economic Forecast
Economists expect inflation to fall further in the coming months, with the government cutting household energy bills from April. KPMG chief economist Yael Selfin said the Bank of England is expected to cut interest rates three times this year.
Simon French, chief economist at Panmure Liberum, believes there is around an 80% chance the Bank of England will cut its interest rate in March. Chancellor Rachel Reeves welcomed the fall in inflation, stating that cutting the cost of living is her number one priority.
Reaction from Officials
Chancellor Rachel Reeves added that the choices made at the budget are bringing inflation down, with £150 off energy bills and a freeze in rail fares. However, Shadow Chancellor Sir Mel Stride said families are still feeling the pinch due to Labour's economic mismanagement.
Impact on Households
Household finances were helped by the January sales, with the British Retail Consortium (BRC) pointing to heavy discounting on clothing, footwear, and furniture. BRC chief economist Harvir Dhillon said the improving picture reflects intense competition between retailers.
