Consumer price changes are important for the economy because inflation is a subtraction in the calculation of real GDP growth, so rising price pressures can depress economic growth and vice versa.
The retail inflation number was much lower than the market expectations, said Tushar Arora, a senior economist at HDFC Bank.
Inflation was largely lowered by prices for electricity and gas following an Ofgem cap on standard variable tariffs that decreased price increases in that category from 8.1pc to 1.4pc.
'House prices continued to grow, albeit at the lowest United Kingdom annual rate since July 2013 with growth in the North East and London lagging behind Northern Ireland, Wales and the West Midlands'.
"On the downside, we see the most significant support line at 1.1295: we note last month's low, the Fibonacci 61.8% one-day, and the PP one-month Support 1, all substantial lines", he added further. Diesel also fell by 2.4p to 129.5p.
"This is helpful news from an economy now being buffeted by heightened Brexit uncertainties".
The Bank of England has already raised interest rates on two occassions in the last 18 months, taking the bank rate up to 0.75%, in order to combat the sharp increase in inflation that resulted from the vote to leave the European Union.
"Assuming some kind of smooth Brexit, it should be able to gently nudge rates up over the next couple of years".
Mumbai: India's headline and core inflation rates are set to converge in the coming months as the economy slows, increasing the chance of more interest rate cuts.
Mr Brettell added that now the "inflation genie is still firmly in the bottle, despite unemployment at multi-decade lows", which has made the Bank's job easier over the past few years.
Currency analyst of OFX Hamish Muress said the inflation rate, along with growing retail prices would have caused volatility for the pound "in a time gone by" but said that Brexit was now dictating the agenda.
Meanwhile, heavy discounting from retailers saw clothing and footwear prices falling by 1.3% for the year to January, which had a small downward pull on inflation.
The manufacturing sector grew 2.7% in December, while electricity sector grew 5.5%.