Cooling UK inflation fuels expectations of March interest rate cut

robot
Abstract generation in progress

Cooling UK inflation fuels expectations of March interest rate cut

Cooling UK inflation fuels expectations of March interest rate cut · Euronews

Una Hajdari

Thu, February 19, 2026 at 12:54 AM GMT+9 1 min read

Inflation in the UK fell to a 10-month low, driven largely by lower food and gas prices, official figures showed on Wednesday — a drop that has reinforced expectations the Bank of England will cut interest rates in March.

The Office for National Statistics said the Consumer Prices Index was 3% higher in January than a year earlier, down from 3.4% in December.

The decline was in line with analysts’ expectations and keeps inflation on course to return to the central bank’s 2% target in the coming months.

When it held its main interest rate at 3.75% at its last meeting earlier this month, the Bank said it expected inflation to be back at target by April.

Related

BoE delivers Christmas rate cut after cooler-than-expected inflation
BoE holds rates at 3.75% as inflation stays stubbornly above target

Relief for Labour as cost pressures ease

The further fall in inflation will offer some relief to the Labour government, which has seen its poll ratings slide sharply since returning to power in July 2024, partly because of cost-of-living pressures.

‘Cutting the cost of living is my number one priority,’ Chancellor of the Exchequer Rachel Reeves said on Wednesday.

Inflation is expected to reach the target in April, largely because of government action. In her Budget last November, Reeves announced tax cuts aimed at bringing down domestic energy bills.

With inflation easing, a rate cut in March is now widely expected. The bigger question for financial markets is how many further reductions will follow this year.

‘Inflation is likely to fall further in the coming months, dropping back to 2% in the near future, which should open the door to more rate cuts later this year,’ said Luke Bartholomew, deputy chief economist at asset manager Aberdeen.

Terms and Privacy Policy

Privacy Dashboard

More Info

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
  • Reward
  • Comment
  • Repost
  • Share
Comment
Add a comment
Add a comment
No comments
  • Pin