UK Inflation Falls to 3.0% in January 2026

The Consumer Prices Index (CPI) rose by 3.0% in the 12 months to January 2026, down from 3.4% in December 2025, according to data published by the Office for National Statistics (ONS) on 18 February 2026. The Consumer Prices Index including owner occupiers' housing costs (CPIH) fell to 3.2%, down from 3.5% in December.

What Drove the Fall

The largest downward contribution to the change in the CPI annual rate came from transport, particularly motor fuels. Petrol prices fell by 3.2% between December 2025 and January 2026, reflecting lower global oil prices. Air fares also contributed to the decline, dropping sharply after the seasonal peak in December.

Food and non-alcoholic beverage prices continued to moderate, with annual food inflation falling to 2.8% in January from 3.1% in December. This is a significant decline from the peak of 19.2% reached in March 2023, though prices remain substantially higher than they were two years ago.

Housing and household services made a smaller downward contribution, partly reflecting lower gas and electricity prices following the January reduction in the Ofgem energy price cap. The cap fell to £1,738 per year for a typical dual-fuel household, down from £1,801 in Q4 2025.

Upward Pressures Remain

Despite the headline fall, several categories continued to exert upward pressure on prices. Services inflation, which the Bank of England watches closely as a measure of domestically generated inflation, remained at 5.2%. This is well above the rate consistent with the 2% CPI target and reflects ongoing wage pressures in the UK economy.

Recreation and culture saw price increases of 4.1% annually, driven by subscription services, package holidays, and cultural admissions. Education costs also remained elevated, with annual increases of 5.8%.

The Path Back to 2%

The Bank of England's February 2026 Monetary Policy Report projected that CPI inflation would fall to around 2% from April 2026, as the impact of the sharp energy price rises in early 2025 drops out of the 12-month comparison. However, the Bank cautioned that the path of inflation remains uncertain and depends on the evolution of energy prices, wage growth, and global commodity markets.

Core CPI — which strips out volatile food, energy, alcohol, and tobacco prices — stood at 3.7%, indicating that underlying price pressures are easing but have further to fall. Economists note that a sustained decline in core inflation will be necessary to give the MPC confidence that it can continue cutting Bank Rate.

What This Means for Households

While falling inflation is welcome news, it means prices are still rising — just at a slower pace. The cumulative impact of high inflation since 2021 means that everyday costs remain significantly higher than they were a few years ago. According to the ONS, the price of an average food basket is approximately 25% higher than in early 2022.

For a broader view of how inflation and other economic indicators are trending, see the UK Economy Dashboard.