Consumer price inflation in the United Kingdom slowed to 3% annually in January, declining from a 3.4% increase in December, according to official data released on Wednesday.
The moderation in price growth, which aligns with market expectations, arrives as labor market data and weak economic output continue to reinforce expectations of an interest rate reduction by the Bank of England.
The latest figures showed that consumer price gains matched the forecasts made by economists, who had anticipated an annual rate of 3% for January. Earlier projections from the BoE had pointed to a headline inflation figure of 2.9% for the month.
Despite the recent deceleration, price pressures in the UK remain higher than those recorded in the United States and the euro zone, where annual inflation rates registered 2.4% and 1.7% respectively in January.
Excluding volatile components such as energy, food, alcohol, and tobacco, the core inflation measure dropped to 3.1% in January from 3.2% previously.
Labor market indicators have shown further signs of weakness. Data released on Tuesday indicated a rise in the UK unemployment rate to 5.2% in December, the highest level seen in five years. Annual pay increases, a significant measure tracked by the central bank, eased in the final quarter of 2025, signaling softer wage-driven inflation pressures.
Additional statistics from the Office for National Statistics last week characterized the broader UK economic environment as stagnant in late 2025, with output showing little expansion.
Investor sentiment now points toward the BoE lowering its key interest rate to 3.5% at its March policy meeting, following a narrow decision to keep rates unchanged in February. However, some officials continue to express concern about persistent underlying price pressures.
