KPMG UK comments on today’s inflation data

“Today’s inflation data will likely prompt the Bank of England to lower interest rates next month. The MPC will welcome the broad-based fall in inflation, with both headline and underlying measures of inflation easing. Given the favourable inflation outlook, the Bank is expected to cut interest rates three times this year, leaving interest rates at 3% by the end of 2026.

“Headline inflation has gradually eased since last summer and is expected to fall further as food and energy prices drop. The combined impact of the government’s energy bill package and the fall in wholesale gas prices could see household energy bills decrease by around 7% from April. Forward-looking data also points to food prices softening over the coming months, as recent declines in global food prices are passed on to households, with the recent adverse weather episodes across Europe not yet making their mark.

"Headline inflation fell to 3% in January, driven by a fall in fuel and food prices. Inflation is likely to hover around 3% over the coming months before falling sharply in April. We expect inflation to return and remain on target from the spring onwards, averaging 2.3% in 2026."