Latest economic data from key markets indicates a clear slowdown in price growth momentum. In the UK, inflation in January fell to 3.0%, reaching its lowest level in almost a year. A similar trend was observed in Japan, where price growth slowed to 2.0%. This situation presents policymakers at the Bank of England and the Bank of Japan with a dilemma regarding further interest rate adjustments in the face of weakening cost pressures.

Price Drop in the United Kingdom

The CPI inflation in the United Kingdom fell in January to 3.0% from 3.4% in December, mainly due to cheaper fuel and food.

Japan with Lowest Reading

In Japan, core inflation slowed to 2.0%, reaching a two-year low, complicating the Bank of Japan's plans regarding interest rate hikes.

Financial Markets Reaction

The FTSE 100 index reached record levels, and the Japanese yen weakened in response to data suggesting later monetary policy tightening.

Stabilization in Other Regions

Forecasts for South Africa and France also indicate a calming of price dynamics, with readings of 3.5% and 0.4%, respectively.

Data from the United Kingdom published by the Office for National Statistics (ONS) shows a drop in the CPI index to 3.0% in January 2026. This is a significant decrease compared to the 3.4% recorded in December. The main factors curbing price increases were lower fuel costs and reductions in food prices and airfares. Nevertheless, the Bank of England is closely monitoring inflation in the services sector, which stood at 4.4%, a figure slightly higher than expected, suggesting persistent wage pressure. The Bank of England, founded in 1694, is one of the world's oldest central banks and has had operational independence in setting interest rates since 1997 to achieve its 2% inflation target. Simultaneously, data from Asia confirmed that Japan's deflationary concerns are giving way to stability. Japan's core inflation slowed to 2.0% in January, marking the lowest level in two years. New Prime Minister Sanae Takaichi faces the challenge of maintaining economic stability as the Bank of Japan considers moving away from its decade-long ultra-loose monetary policy. Meanwhile, in South Africa, inflation also eased, falling to 3.5%, strengthening arguments for an interest rate cut by its central bank. 2025-12: 3.4, 2026-01: 3.0 3.0% — is the inflation rate in the UK However, experts warn that the drop in inflation may be temporary. Catherine Mann, representing the UK central bank, signaled readiness to keep interest rates unchanged for an extended period until inflation expectations are fully under control. Attention is drawn to new challenges for retail trade, which could push prices up again in the second half of the year. „Inflation fell sharply in January to its lowest level since March last year, driven in part by falling gasoline prices.” — Grant Fitzner Inflation Indicators January vs December: : → ; : → ; : →

Mentioned People

  • Catherine Mann — Member of the Monetary Policy Committee of the Bank of England, advocating for a cautious approach to interest rate cuts.
  • Sanae Takaichi — Prime Minister of Japan, facing the country's economic challenges amid low inflation.