Lower fuel prices and airfares help drive inflation down

UK inflation fell to 3% in January, down from 3.4% in December, indicating a further drop in the rate at which prices are rising.

The move was partly driven by lower fuel prices, lower airfares and lower food prices - particularly for bread, cereals and meat, the Office for National Statistics (ONS) said.

Although the rate of inflation has fallen, prices themselves are not coming down, but simply rising at a slower pace.

Chancellor Rachel Reeves welcomed the fall, adding that "cutting the cost of living is my number one priority".

ONS chief economist Grant Fitzner said: "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."

Inflation has steadily been decreasing toward the government's target of 2%.

December's sudden uptick was attributed to one-off seasonal factors such as flight costs over Christmas and an increase in tobacco tax announced in the Budget.

"This morning's inflation data will be a welcome relief," said investment manager Jonathan Raymond at Quilter Cheviot.

A slowdown in inflation raises the likelihood that the Bank of England will reduce its key interest rate when it meets next month, which could in turn boost economic growth by reducing borrowing rates.

Combined with the news of a slowdown in wage growth, Wednesday's inflation figures raised the chances of cut in the interest rates by the Bank.