UK inflation slowed for the third month in a row in January amid falling transport costs, reducing pressure on the Bank of England to make more large rate rises.

The Consumer Prices Index rose by 10.1pc year-on-year in January, its lowest level since September, meaning inflation has now cooled by a whole percentage point since it hit a 41-year high of 11.1pc in October 2022.

This was a drop from the 10.5pc rate recorded in December and means inflation has slowed in line with the Bank of England's expectations, but more quickly than economists predicted, with a City consensus of 10.3pc for January.  

On a monthly basis, CPI fell by 0.6pc between December and January, according to the Office for National Statistics.

A drop in passenger transport costs has been key. Prices in this sector rose by 7.6pc in January, a big slowdown from the 18.3pc growth rate recorded in December.

The largest fall came from passenger transport by air. In December, the cost of air travel soared by 44.1pc, the fastest rate since 1989 when the ONS's data series began. In January, this eased to 18.4pc.

The annual RPI inflation rate was unchanged at 13.4pc in January.

It comes as new data this week showed that in the final three months of 2022 wages grew at their fastest pace outside of the pandemic since ONS records began in 2001.

Regular pay which excludes bonuses rose by 6.7pc from October to December.