UK CPI inflation slowed from 3.4% in December to 3.0% in January 2026, its lowest rate since March 2025, and it was in line with the Bloomberg consensus beforehand. January’s slowdown in price growth was primarily driven by food prices and transport,  especially air fares. Education costs also placed downward pressure on the CPI inflation index as last year’s VAT rise on school fees dropped out of annual change figures. CPI inflation remained 1.0 percentage point above the Bank of England’s 2.0% target. But, as further base effects from last year go out of the annual change figures, CPI inflation is likely to slow to 2.0% over the next few months.

Core CPI inflation, which excludes energy, food, alcohol and tobacco, slowed marginally to 3.1% in January compared with 3.2% in the year to December. Services inflation, which the Bank of England closely monitors as a reflection of underlying, medium-term price inflation, also slowed marginally to 4.4% in January compared with 4.5% in December, but it remained slightly higher than the Bank of England’s forecast of 4.1%.

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