- Prior +3.4%
- Core CPI +3.1% vs +3.0% y/y expected
- Prior +3.2%
The inflation picture continues to point to some softening, but not to the degree to make the BOE feel comfortable enough. The drop in headline annual inflation is largely due to base effects, with energy prices being the main factor. Overall prices for motor fuel fell by 2.2% in the 12 months to January 2026, as compared with a rise of 0.9% in the 12 months to December 2025.
The second-largest downward effect came from air fares, which ties to a seasonal effect mostly. ONS points out that prices tend to rise into December and fall into January historically, which matches up with holiday-boosted pricing.
“In December 2024 and January 2025, this pattern was less pronounced than in previous years. The monthly rise in December 2024 was the third-lowest December rise since monthly price collection began in 2001. The weaker growth into December 2024 led to a smaller fall than normal into January 2025.
The index this year followed a more conventional pattern, perhaps because the return flights in December did not fall on Christmas Eve and New Year’s Eve. The more pronounced rise into December 2025 and fall into January 2026 led to a large upward contribution to the change in the annual rate in December 2025 and a large downward contribution in January 2026.”
As for core prices, it’s still all about services inflation for the most part. Even with a marginal decline in core annual inflation, it’s still keeping at just above 3% for now. And that’s still some ways off from the desired 2% target level for the BOE.
Services inflation remains elevated at 4.4%, observing just a marginal drop from 4.5% in December.
