March cut to UK interest rates more likely after inflation drops to 10-month low; London house prices fall – as it happened

FTSE 100 hits record high after UK inflation falls to 3% in January, thanks to cheaper petrol and air fares, and a slowdown in food inflation

The chances of an interest rate cut next month have risen this morning, following the news that UK inflation fell to 3% in January.

The money markets are now indicating that a quarter-point rate cut is now an 81.5% chance, up from 77% last night - and around 65% last week.

Inflation fell sharply in January, providing some relief to UK consumers at the start of the year. Prices are clearly moving in the right direction, with closely watched core and services inflation continuing their downward trend from previous months.

Behind the headline figure, motorists were helped as petrol pump prices continued to decline in January to their lowest level since summer 2021. Food inflation also fell after the Christmas period but is still a key area to watch in 2026 as it accounts for a large part of the UK's everyday spending. Industry barometers suggest that weekly supermarket shops are still elevated with fresh produce prices rising over the month.

The cost of raw materials for businesses fell over the past year, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed."