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Inflation fell to 3 per cent in January in a rate piece of good news for Chancellor Rachel Reeves.
The rate of Consumer Prices Index(CIP) inflation dropped from 3.4 per cent in December, according to the Office for National Statistics.
It is the lowest rate since March and will reinforce expectations of another interest rate cut, possibly as soon as next month.
Disappointing growth figures for the final quarter of last year have added to forecasts for a rate cut in March, to 3.5 per cent from 3.75 per cent currently.
The fall was driven by falls in the price of petrol, food and clothing last month.
But inflation remains above the government's target of 2 per cent. Sir Mel Stride, the Conservative shadow chancellor, said: 'Families are still feeling the pinch because of Labour's economic mismanagement.
'This comes after the Office for National Statistics confirmed unemployment has risen to a five-year high, with youth unemployment now above the European average, and GDP per capita falling.
Ms Reeves said: 'Cutting the cost of living is my number one priority.
The reading was in line with the predictions of economists and puts inflation back on a downward trajectory after an increase in the previous month.
Data showed that motor fuels particularly contributed to the fall of inflation, with the average price of petrol falling by 3.1p per litre between December 2025 and January 2026.
ONS chief economist Grant Fitzner said: '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.'
Ms Reeves said: 'Cutting the cost of living is my number one priority.
'Thanks to the choices we made at the budget we are bringing inflation down, with £150 off energy bills, a freeze in rail fares for the first time in 30 years and prescription fees frozen again.
'Our economic plan is the right one, to cut the cost of living, cut the national debt and create the conditions for growth and investment in every part of the country.'
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