The Office for National Statistics (ONS) said that consumer price inflation (CPI) fell sharply to 3.6% in January, from 4.2% in December 2011.
Although the figures - showing the lowest inflation reading since November 2010 - are likely to be welcome news to the Bank of England, ahead of Wednesday's update of its quarterly economic forecasts, Governor Mervyn King will still be expected to explain why inflation has remained well above target for the past two years.
Furthermore, the retail price index (RPI) measure of inflation - often used in things such as wage negotiations - also fell from 4.8% to 3.9%. This marks the lowest figure since February 2010.
But what effects will all this have? According to a poll by MoneySupermarket.com, 20% of consumers are starting to save again as a result of lower inflation. Just over a fifth of these have specifically been waiting for inflation to fall before starting a savings pot.
An additional 10% of those polled said a fall in inflation will encourage them to save more, but they don't know how to get the most out of their savings.
Kevin Mountford, head of banking at MoneySupermarket.com, commented: "High inflation combined with low interest rates has particularly impacted on UK savers who have found it very difficult to gain any real returns on their savings pots. With this fall in inflation, there will be some savings accounts which will now beat inflation, and consumers need to make sure they are on the best deals possible to maximise the returns."