Responding to the latest inflation statistics, William Ellis, senior economist at the Institute For Public Policy Research, said: “Inflation fell sharply to 3 per cent in January – led by slowing transport and food prices – as factors behind the temporary bump in December faded away.

“This is part of a longer-term trend, following a wider cooling in the economy. Inflation is down 0.8 percentage points since September, pay growth has slowed, and unemployment just reached its highest rate in nearly five years.

“Measures announced in the Autumn Budget, such as support on energy bills and fuel duty, will also help to keep inflation down over the coming months.

“Despite this, the Bank of England’s monetary policy stance is removing demand from the UK economy and lowering growth. A further cut to interest rates will be needed in March to improve sluggish economic growth and ensure that inflation doesn’t drop below target.”

Commenting on today’s ONS inflation figures, Debapratim De, director of economic research at Deloitte, said: “The sharp slowing of price rises in January is consistent with expectations of inflation plummeting over the coming months.

“A substantial reduction in energy bills, much slower rises in regulated prices compared to last year, and a moderation in food price rises are set to bring headline inflation at or close to the Bank of England’s two per cent target in April.

“This, alongside a softening labour market, should create room for further interest rate cuts. Recent MPC voting patterns and today’s data point to an earlier easing than markets foresee.

“We expect two 25-basis-point cuts between now and autumn, with the first cut coming in April.”

The prime minister has said on X: “The choices this Labour government has made means inflation has fallen today to its lowest rate in a year.

“Lower food and petrol prices are helping ease the pressure on household budgets. I know there’s more to do, cutting the cost of living is my number one priority.”

Thomas Pugh, chief economist at tax and consultancy firm RSM UK said: “Today’s drop was just the start of a steep slide that should take inflation to 2 per cent in April, which will set the stage for another interest rate cut in the summer.

“Downward pressure on inflation was broad based, which will give policy makers more confidence that the disinflation trend is still intact.

“Food and non-alcoholic drink inflation as well as energy inflation, which are both key drivers of inflation expectations, slowed sharply, fuel inflation turned negative and December’s big increases in airfares unwound.

“However, given almost all the survey measures of prices suggest disinflation has slowed, the MPC will still have to be cautious this year, even as headline inflation drops. Indeed, services inflation is proving to be much stickier than headline inflation.

“It only marginally slowed to 4.4 per cent from 4.5 per cent in December and core inflation ticked down to 3.1 per cent from 3.2 per cent both above the MPC’s latest forecasts.

“That doesn’t rule out a third cut later in the year, especially if the labour market remains weak, but it means a third rate cut is a downside risk rather than the base case at the moment.”

Regarding the impact on mortgages, Alice Haine, personal finance analyst at BestInvest said: “Softer inflation raises the prospect of further mortgage rate cuts for homeowners and prospective buyers hoping for fresh respite from high borrowing costs.

“Lenders have upped mortgage rates in recent weeks amid shifting expectations on the interest rate path, so the possibility of renewed declines is likely to buoy the housing market.

“If we do see a rate cut next month, the impact on borrowers will depend on the timing of their current deal.

“Those on fixed-rate mortgages with several months or years left to run will see no change in their monthly repayments. Borrowers on tracker products, however, may see an almost immediate reduction.

“Homeowners emerging from short-term fixes secured at the peak of the mortgage rate cycle may find they can lock in a more favourable deal.

“Conversely, those nearing the end of ultra-low five-year fixes secured before the rate-hiking cycle began in late 2021 still face higher repayments, with monthly costs likely to rise unless they have made significant overpayments – though easing mortgage rates will at least soften the blow.”

Scott Gardner, investment strategist at J.P. Morgan Personal Investing said: “Inflation fell sharply in January, providing some relief to UK consumers at the start of the year.

“Prices are clearly moving in the right direction, with closely watched core and services inflation continuing their downward trend from previous months.

“Behind the headline figure, motorists were helped as petrol pump prices continued to decline in January to their lowest level since summer 2021.

“Food inflation also fell after the Christmas period but is still a key area to watch in 2026 as it accounts for a large part of the UK’s everyday spending.

“Industry barometers suggest that weekly supermarket shops are still elevated with fresh produce prices rising over the month.

Dr Liliana Danila, lead economist at the Food and Drink Federation said: “It’s positive to see a lower rate of food inflation in January, however it still remains a real worry for household budgets and above long-term averages.

“After many years of rising costs, businesses across the supply chain have had their margins eroded, leaving manufacturers particularly susceptible to the supply chain shocks caused by geopolitics or climate change.

“We’ve previously seen the impact that this can have on inflation, with prices of ingredients like cocoa and coffee skyrocketing, so the UK’s recent extreme wet weather flooding farms is a concern for the year ahead.

“To help stabilise food inflation in the long term and protect shoppers from future price spikes, government must incentivise investment in business resilience.”

Reacting to the budget, Holly Mackay, founder of Boring Money said: “Consumers can take comfort from lower inflation numbers which should ease the pressure on the weekly shop and also signal a strong likelihood of lower interest rates next month.

“The direction of travel is down which means mortgages are likely to come down as we head into summer and those with cash savings accounts should really shop around now and consider locking in a fixed rate if possible.

“The best fixes today are paying over 4% which looks pretty good to me given what is likely to happen to rates over the coming months.

“There is a sting in the tail. Slower inflation also comes with less growth and a difficult jobs market.

“As employers seek to keep costs low we should all make sure we build a cash buffer – ideally at least 3 months’ income – to cushion us in the event of redundancy.

“Homeowners coming off fixed rate mortgages should shop around. Passively accepting your lender’s standard variable rate which is offered at the end of a fixed term is almost always a bad idea so contacting an independent mortgage broker is a sensible move.”

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.

The average price of petrol stood at 133.2p per litre in January, down from 137.1p per litre in the same month a year earlier.

Meanwhile, diesel prices also dropped, falling by 3.2p per litre compared with the previous month.