British inflation fell to its lowest since March ’25, according to official data. This added to expectations of an interest rate cut to be announced shortly by the Bank of England (BoE). It is a measure of underlying price pressures that remained strong.
Consumer prices increased by 3% in annual terms during January ’2026. It slowed down sharply from a 3.4% rise in December ’25, as disclosed by the Office for National Statistics on Wednesday, 18 February. Further, transport, food, and non-alcoholic drink prices increased less quickly.
Most economists polled by Reuters had expected the UK’s headline inflation rate, being the highest among the Group of 7 nations, to decrease to 3% in January ’26. The BoE was expecting 2.9% inflation during January ’26. It is projected that it may fall in April 2026, close to its 2% target.
The BoE sees food inflation as key to shaping public expectations about prices. More broadly, this was the weakest since April ’25. Airline fares fell sharply during January ’26 after a jump in December ’25.
Core inflation, excluding energy, food, alcoholic beverages, and tobacco, rose by 3.1% in January ’26. It was the lowest in the last 5 years since 2021.
The latest figures mean that the BoE will likely cut bank rates during the upcoming spring. An associate economist with the National Institute of Economic and Social Research, Nicolas Crittenden, said that a further cut later this year was expected as inflation dissipates and unemployment continues to climb gradually.
Interest rate futures have an almost 90% chance of being cut by the BoE in March. This is up from around 80% before the data. It was followed by another in late 2026. The Sterling Pound was little changed against the U.S. Dollar.
Some lingering price pressures remained in Wednesday, 18 February’s data. This may reinforce the more hawkish members of the BoE’s Monetary Policy Committee.
