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UK inflation fell sharply to 3 per cent in January, strengthening the case for the Bank of England to cut interest rates as soon as its next meeting in March.

Wednesday’s figure from the Office for National Statistics marked a slowdown from December’s 3.4 per cent figure and was the lowest rate since last spring. It was in line with the expectations of economists polled by Reuters.

The BoE held interest rates at 3.75 per cent this month but the decision was closely fought, with some policymakers arguing for an immediate cut because of weakening demand and a cooling labour market. 

Official figures on Tuesday showed that unemployment rose to 5.2 per cent at the end of last year, while wage growth slowed, fuelling the case for another quarter-point rate reduction.

The central bank predicts that inflation will fall to roughly its target level of 2 per cent from April, thanks in part to Budget measures aimed at curbing bill increases.