![\"Rachel](\"https:\/\/dailybusinessgroup.co.uk\/wp-content\/uploads\/2025\/11\/Rachel-Reeves-leaves-to-deliver-Budget.png\")
Inflation has fallen to 3% from 3.4% last month, pointing to a likely interest rate cut by the Bank of England next month.<\/p>\n
The fall was in line with forecasts and brings price growth down to its lowest level since last March.<\/p>\n
Falling inflation is also a timely boost to Chancellor,\u00a0Rachel Reeves ahead of next month\u2019s spring statement when she will update on the country\u2019s finances.<\/p>\n
It comes against weaker figures on economic growth and unemployment. GDP expanded by only 0.1% in the three months to the end of December, while unemployment increased to a five-year high of 5.2%.<\/p>\n
Inflation peaked last year at 3.8% and is now closer to the Bank\u2019s 2% target. <\/p>\n
In November\u2019s Budget Ms Reeves Reeves predicted a cut in inflation after announcing cuts to energy bills and rail fares.<\/p>\n
Responding to today\u2019s data, she said: \u201cOur 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.\u201d<\/p>\n
Martin Sartorius, lead economist at the CBI, said: \u201cInflation ticked down in January, broadly in line with the Bank of England\u2019s projections. We expect this downward momentum to continue in the coming months, reflecting the fading impact of last year\u2019s energy and utility price increases.<\/p>\n
\u201cJanuary\u2019s slowdown in inflation, alongside cooling labour market conditions, increases the likelihood that the Monetary Policy Committee will cut rates again over the next couple of months. <\/p>\n
\u201cBeyond then, the scope for further Bank Rate reductions will become more limited, as the Committee looks to ensure that inflation returns sustainably to the 2% target.\u201d<\/p>\n
Luke Bartholomew, deputy chief economist, at Abderdeen Group, said: \u201cThe drop in inflation back to 3% should clear the way for the Bank of England to cut interest rates in March. Granted services inflation was a tad stronger than expected, and this does play an important role in the Bank\u2019s thinking. <\/p>\n
\u201cBut with the labour market data yesterday pointing to ongoing weakness in employment and a further softening in pay growth, most policymakers are likely to look through any short run stickiness in the services data.<\/p>\n
\u201cIndeed, inflation is set to fall further in coming months, falling back to 2% in the near future, which should open up further rate cuts later this year.\u201d \u00a0<\/p>\n
The latest figure may also help boost Labour\u2019s prospects in next week\u2019s by-election in Gorton and Denton.<\/p>\n
Stock prices in\u00a0London\u00a0closed mostly higher, as investors bet on the Bank of England cutting interest rates in March after unemployment increased, while the pound fell.<\/p>\n
The FTSE 100 index closed up 82.48 points, 0.8%, at 10,556.17, a new record high.\u00a0<\/p>\n
The pound was lower at $1.3531 on Tuesday afternoon from 1$.3629 at the equity market close on Monday. <\/p>\n
The unemployment rate came in at 5.2% for the three months ended December, up from 5.1% in the three months ended November.<\/p>\n
\u2026more follows<\/p>\n
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