Inflation falls to 10-month low of 3% in boost to interest rate cut hopes

This marks a sharp drop from the 3.4% recorded by the ONS in December and boosts hopes for a cut to interest rates.

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.

Grant Fitzner, chief economist at the Office for National Statistics (ONS), said this drop in the inflation rate to 3% in the year to January was due in part to lower petrol prices.

"Airfares were another downward driver this month with prices dropping back following the increase in December," he said.

"Lower food prices also helped push the rate down, particularly for bread and cereals and meat. These were partially offset by the cost of hotel stays and takeaways."

Reacting to the drop, Chancellor Rachel 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.”

Jesse Norman, shadow leader of the House of Commons, told Vanessa Baffoe on LBC News: "The economy desperately needs to be given the measures it requires to grow."

He noted that inflation "is still 50% higher than the government inherited at the last general election", and suggested the only reason it's coming down is because of the Bank of England's concerns about growth.

Mr Norman added: "It's worried about the economy because the economy keeps getting clobbered by Labour and by Rachel Reeves. 

"It's not just a matter of the individual measures, national insurance and all the other tax rises that have gone on and the spending that's taken place. Also, a matter of U-turns, which create additional uncertainty in the economy."

Shadow chancellor Mel Stride said this drop still leaves inflation "below target thanks to Labour's choices."

He added: "Families are still feeling the pinch because of Labour’s economic mismanagement.

"Britain is not being governed - the economy is weaker and working people are paying the price. Only the Conservatives have a plan for a stronger economy, and a leader with the backbone to deliver that plan and get Britain working again."

This comes after the rate of UK unemployment rose to 5.2% in the three months to December, up from 5.1% in the three months to November.

The Office for National Statistics (ONS) said the rate of unemployment lifted to 5.2% in the three months to December, up from 5.1% in the three months to November.

This was the highest since the three months to January 2021 and the highest for over a decade outside of the pandemic era.Most economists had expected unemployment to remain at 5.1% in the latest quarter.

The ONS added that regular wage growth fell back once again, to 4.2% in the three months to December, against a downwardly-revised 4.4% in the three months to November, and was 0.8% higher after taking Consumer Prices Index inflation into account.

But there was a welcome increase in vacancies, up by 2,000 quarter-on-quarter to 726,000 in the three months to January.