UK CPI Report: January 2026 - Inflation Falls to 3.0%
The Office for National Statistics (ONS) released the Consumer Price Index (CPI) report for January 2026 on February 18. Here's a breakdown of the key numbers and how they compare to January 2025.
Headline Overview
| Indicator | Jan 2025 | Jan 2026 | Change (pp) |
|---|
| CPI (YoY) | 3.0% | 3.0% | 0.0 |
| CPIH (YoY) | 3.9% | 3.2% | -0.7 |
| Core CPI (YoY) | 3.7% | 3.1% | -0.6 |
| CPI Services (YoY) | 5.8% | 4.4% | -1.4 |
| CPI Goods (YoY) | 1.0% | 1.6% | +0.6 |
| CPI MoM | -0.1% | -0.5% | -0.4 |
| RPI (YoY) | — | 3.8% | — |
Key takeaway: While headline CPI is unchanged at 3.0% year-on-year between Jan 2025 and Jan 2026, the underlying picture has improved significantly. Core CPI dropped from 3.7% to 3.1% (lowest since August 2021) and services inflation fell from 5.8% to 4.4% (joint-lowest since May 2022) — both key metrics the Bank of England watches closely.
The CPIH (which includes owner occupiers' housing costs) fell from 3.9% to 3.2%, reflecting easing housing pressures.
Key Sector Inflation — CPI Divisions (Year-on-Year)
| Division | Jan 2025 | Jan 2026 | Change (pp) |
|---|
| Transport | 1.7% | 2.7% | +1.0 🔴 |
| Food & Non-Alcoholic Beverages | ~3.3% | 3.6% | +0.3 🔴 |
| Housing & Household Services (CPIH) | ~6.2% | 4.5% | -1.7 ⬇️ |
| Restaurants & Hotels | — | 4.1% | — |
| Recreation & Culture | — | 2.6% | — |
⬇️ Housing & household services made the largest downward contribution to the CPIH annual rate change. Owner occupiers' housing (OOH) costs contribution fell for 12 consecutive months, and rent contributions hit their lowest since March 2022.
🔴 Transport rose from 1.7% to 2.7%, but actually decelerated sharply from December's 4.0%. The key driver was falling motor fuel prices (petrol fell 3.1p/litre between Dec and Jan), though air fares remain volatile.
Food eased from 4.5% in December to 3.6% in January — a significant month-on-month drop and one of the largest downward contributors to the headline decline.
Goods vs Services Split
| Measure | Jan 2025 | Jan 2026 | Change (pp) |
|---|
| CPI All Goods | 1.0% | 1.6% | +0.6 🔴 |
| CPI All Services | 5.8% | 4.4% | -1.4 ⬇️ |
| CPIH All Goods | 1.0% | 1.6% | +0.6 🔴 |
| CPIH All Services | 5.8% | 4.3% | -1.5 ⬇️ |
⬇️ The services disinflation story is the headline here. Services inflation has fallen 1.4pp in a year, driven by slowing rent growth, easing transport services costs, and moderating hospitality prices. The BoE has been laser-focused on this metric — this is the joint-lowest reading since May 2022.
🔴 Goods inflation ticked up from 1.0% to 1.6%, partly reflecting motor fuel base effects and firmer food prices.
Monthly Highlights (January 2026)
| Category | MoM Change | Notes |
|---|
| CPI All Items | -0.5% | Larger drop than Jan 2025 (-0.1%) |
| Transport | -1.8% | Motor fuels + air fares falling seasonally |
| Food & Non-Alcoholic Beverages | — | Key downward contributor |
| Restaurants & Hotels | -0.7% | Hotel prices fell 8.8% in Jan |
| Housing & Household Services | — | Continued easing in OOH costs |
Contributions to Change (Dec 2025 → Jan 2026)
Largest downward contributions to the fall from 3.4% to 3.0%:
Largest upward contributions:
Bank of England Outlook
| Indicator | Current |
|---|
| Bank Rate | 4.50% |
| BoE 2% target | Still above, but converging |
| BoE forecast | ~2.1% by April 2026 |
| Economist consensus (Q4 2026) | 2.2% |
The Bank of England predicted inflation would fall to around 3% in Q1 2026 — which it has now hit. The BoE expects further easing toward its 2% target by mid-2026, helped by Autumn Budget disinflationary measures and growing labour market slack (unemployment has been ticking up).
Services inflation at 4.4% remains above the BoE's comfort zone, but the downward trend is encouraging. Markets are pricing in further rate cuts through 2026.
Context
Unlike the US and Canada, the UK did not have any one-off tax holiday distortions — making the Jan 2025 vs Jan 2026 comparison cleaner.
UK CPI at 3.0% remains above the US (2.4%) and Canada (2.3%), though below Nigeria (15.1%).
The cost of living remains a top concern: ONS data shows prices have risen nearly 20% cumulatively over the past five years.
The next CPI release is scheduled for 25 March 2026 (February data).
Source: Office for National Statistics, Consumer Price Inflation, UK: January 2026 (released 18 February 2026)
