Gasoline value drop sees UK inflation fall to lowest stage since March 2025 in enhance to rate of interest reduce expectations

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Your help makes all of the distinction. Learn extra UK inflation has fallen to the bottom stage in practically a 12 months after a drop in airfares, petrol and meals costs – paving the best way for rates of interest cuts as quickly as subsequent month.

Official figures present inflation tumbled to three per cent in January, with economists predicting it's now on observe to drop to the federal government goal – 2 per cent – by April.

The autumn within the Shopper Value Index (CPI) exhibits a return to the gradual downward development seen on the finish of final 12 months after a shock rise in December to three.4 per cent.

Together with rising unemployment and slowing wage progress information launched this week, in addition to a regularly weak financial system, it's anticipated that the autumn might spur the Financial institution of England (BoE) to chop rates of interest to three.5 per cent when the Financial Coverage Committee convenes to vote on 19 March. An rate of interest reduce could be broadly seen as a lift for owners.

<img src="https://static.independent.co.uk/2026/02/18/9/46/Chancellor-Rachel-Reeves-Responds-To-January-Inflation-Statistics-During-A-Visit-To-Sainsburys-In-So.jpeg" srcset="https://static.independent.co.uk/2026/02/18/9/46/Chancellor-Rachel-Reeves-Responds-To-January-Inflation-Statistics-During-A-Visit-To-Sainsburys-In-So.jpeg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2026/02/18/9/46/Chancellor-Rachel-Reeves-Responds-To-January-Inflation-Statistics-During-A-Visit-To-Sainsburys-In-So.jpeg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="Chancellor Rachel Reeves has said that cutting the cost of living is her ‘number one priority’" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

Chancellor Rachel Reeves has mentioned that slicing the price of dwelling is her ‘primary precedence’ (Getty) The slowdown – which implies costs should not rising as quickly as beforehand – will present some reduction for the chancellor, amid the Financial institution of England’s effort to carry inflation again to the goal stage.

Responding to the newest Workplace for Nationwide Statistics (ONS) information, Rachel Reeves mentioned that “slicing the price of dwelling is my primary precedence”.

“Due to the alternatives we made on the Funds, we're bringing inflation down, with £150 off power payments, a freeze in rail fares for the primary time in 30 years and prescription charges frozen once more,” she added.

Inflation – which is the speed at which costs for items and companies rise throughout an financial system over a time period – hit a excessive of greater than 11 per cent in October 2022.

It has returned to extra manageable ranges prior to now 12 months, however the tempo has been slower than companies and households would have favored, leading to rates of interest staying greater for longer.

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Greater rates of interest assist to carry down inflation, whereas decrease rates of interest may help enhance a stagnant financial system.

Falling family payments and the discount of the power value cap in April are anticipated to contribute to bringing CPI inflation again to 2 per cent by spring. Meals inflation can also be anticipated to average, having been a giant contributor to excessive inflation final 12 months.

In January, clothes and footwear prices coming down contributed to the general decline in inflation, in addition to the price of eating places and motels, transport and furnishings. Nevertheless, there have been notable rises throughout alcohol and tobacco, training and well being sectors.

The ONS notes that motor fuels had the largest downward impression on month to month prices, with the common value of petrol falling by 3.1 pence per litre between December 2025 and January of this 12 months.

Dr Liliana Danila, lead economist on the Meals and Drink Federation, cautioned the federal government to behave now to stop massive value spikes once more.

“After a few years of rising prices, companies throughout the provision chain have had their margins eroded, leaving producers notably prone to the provision chain shocks attributable to geopolitics or local weather change,” mentioned Dr Danila.

“To assist stabilise meals inflation in the long run and shield consumers from future value spikes, authorities should incentivise funding in enterprise resilience.”

The British Chambers of Commerce referred to as for higher funding in companies to permit the financial system to thrive – notably in gentle of rising unemployment.

“CPI could also be at its lowest stage for practically a 12 months, however that headline determine is barely a part of the story. Inflation issues amongst companies persist,” mentioned Stuart Morrison, BCC analysis supervisor. “Companies are going through large value pressures that are squeezing confidence, stalling funding and holding again recruitment.

“Corporations are clear: easing inflation should be matched by motion to chop the price of doing enterprise. That should embody enterprise charges reform, lowering power prices and making it cheaper to export. Solely then, will companies have the ability to absolutely turbocharge financial progress.”

In the meantime, Holly Mackay, founding father of Boring Cash, reminded savers to maneuver their money to the perfect charges now, particularly in the event that they wished to lock in greater charges earlier than a possible upcoming discount.

“The route of journey is down which implies mortgages are more likely to come down as we head into summer season and people with money financial savings accounts ought to actually store round now and think about locking in a hard and fast price if attainable,” she mentioned.

For customers, the main target now ought to flip to making sure family funds are so as forward of additional rates of interest cuts later this 12 months, amid a regarding jobs market and a still-stagnant financial system.

<img src="https://static.independent.co.uk/2026/02/17/11/33/GettyImages-85477778.jpg" srcset="https://static.independent.co.uk/2026/02/17/11/33/GettyImages-85477778.jpg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2026/02/17/11/33/GettyImages-85477778.jpg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="Mortgages are likely to come down and those with cash savings accounts are being advised to shop around for the best fix rate deals" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

Mortgages are more likely to come down and people with money financial savings accounts are being suggested to buy round for the perfect repair price offers (Getty) “Slower inflation additionally comes with much less progress and a troublesome jobs market. As employers search to maintain prices low we must always all be sure we construct a money buffer – ideally not less than three months’ earnings – to cushion us within the occasion of redundancy,” Ms Mackay added.

“Householders coming off fastened price mortgages ought to store round. Passively accepting your lender’s Normal Variable Charge which is obtainable on the finish of a hard and fast time period is nearly at all times a nasty thought so contacting an impartial mortgage dealer is a smart transfer.”

Tamsin Powell, shopper finance knowledgeable at Creditspring, cautioned it was necessary to do not forget that slowing inflation doesn't imply decrease costs – it means they're climbing at a decrease price than beforehand.

“For households who observe each pound, even small slowdowns in meals and power value rises make a distinction,” she mentioned. “Nevertheless it’s necessary to maintain this in perspective. Costs aren’t falling again to the place they had been – they’re simply rising extra slowly.”

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