Inflation has fallen for a third month in a row to 10.1 per cent, the Office of National Statistics (ONS) has said.
The fall in prices in December was larger than expected in a boost to the UK's efforts for getting inflation back under control.
Most economists had been expecting a drop to 10.3 per cent last month.
The inflation rate dropped by more than had been anticipated
Yui Mok
A drop in a fall in fuel prices was partially behind the decrease.
Grant Fitzner, chief economist for the Office for National Statistics, said: “Although still at a high level, inflation eased again in January.
“This was driven by the price of air and coach travel dropping back after last month’s steep rise.
“Petrol prices continue to fall and there was a dip in restaurant, cafe and takeaway prices.
“The cost of furniture decreased by more than this time last year, in line with traditional New Year discounting. These were offset by rising prices for alcohol and tobacco, following on from seasonal price cuts in December and a more subdued rise at the same time last year. He added:
“There are further indications that costs facing businesses are rising more slowly, driven by falls in crude oil, electricity and petroleum prices.
“However, business prices remain high overall, particularly for steel and food products.”
It comes after the annual rate of inflation reached 11.1 per cent in October 2022.
The Bank of England has ramped up interest rates in recent months in a bid to help curb spending and reduce the rate.
While the decrease in prices was welcomed by Chancellor Jeremy Hunt, he warned the fight to get a grip on inflation is "far from over".
Jeremy Hunt said the fight to get a grip of inflation is 'far from over'
Stefan Rousseau
Shadow chancellor Rachel Reeves blamed Government policy for the slow decrease
Kirsty O'Connor
"High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan halve inflation this year, reduce debt and grow the economy," he said.
Unions are currently demanding higher than inflation pay rises, which ministers have warned would risk slowing the progress of brining down the rate.
Shadow chancellor Rachel Reeves said inflation was "still close to a 40-year high" and blamed Government policy.
She added: “Despite Britain’s enormous potential, in April households will be hit by another economic blow when energy prices go up.
“Labour would be bringing in a proper windfall tax on oil and gas giants now to stop energy bills going up in April.
“Our long-term plan to sprint to clean power and insulate 19 million homes will keep bills low for the future too, and get our economy growing.”