UK inflation fell to 3% in January, hitting its lowest level since March 2025. The Office for National Statistics (ONS) said this drop matches economists’ predictions. Falling petrol prices, air fares, and cheaper food items helped push inflation down. Inflation last year peaked at 3.8%, but it is expected to fall quickly to the Bank of England’s 2% target this year. The latest drop could lead to an interest rate cut as soon as next month, as policymakers worry about slow economic growth. ONS chief economist Grant Fitzner said, "Air fares were another downward driver this month with prices dropping back following the increase in December." He added, "Lower food prices also helped push the rate down, particularly for bread & cereals and meat. These were partially offset by the cost of hotel stays and takeaways." Raw material costs for businesses fell due to lower crude oil prices, and factory goods cost increases have slowed. The UK's GDP grew by just 0.1% in the last three months of 2024, and unemployment rose to a five-year high of 5.2%. Private sector earnings grew by 3.4% over the year to December. Chancellor Rachel Reeves welcomed the figures, saying they ease the cost of living pressure. Her November budget cut energy bills and froze rail fares and prescription fees. She said on Wednesday, "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." Reeves added, "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."