The convergence of the two measures, along with recent surveys from the central bank suggesting slowing inflationary expectations among households and industry, will be key for a clearer assessment of policy actions by the Monetary Policy Committee. "Ofgem, the energy regulator, however, announced last week that the cap will rise by 10% in April, which will boost the headline rate of CPI inflation by 0.3pp".
Head of inflation at ONS Mike Hardie said: "The fall in inflation is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time past year".
While Ben Brettell, senior economist at online brokerage Hargreaves Lansdown, said the inflation data is not going to change the Bank's thinking about the economy or interest rates.
December's growth was much faster than a downwardly revised 0.3 percent year-on-year increase in November, the data showed.
Sterling held firm after the news, at 1.289 USA dollars and 1.138 euros. "This reflected the imposition of a new cap on Standard Variable Tariffs, which was 6% below prior average levels".
The purchasing power of Dollars is dragged down by inflation.
'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'.
Last week the BoE said inflation was likely to fall below 2.0 percent in coming months before picking up again. Diesel also fell by 2.4p to 129.5p.
Consumer-price growth reached 2.05 percent in January, well below the Reserve Bank of India's medium term target of 4 percent. City economists think so.
"But with inflation fairly well behaved, the Bank will also have the ability to support the economy by cutting interest rates if there were a no deal Brexit", he added.
The Retail Prices Index (RPI), a separate measure of inflation, was 2.5%, down from 2.7% in December.
Core consumer inflation, which strips out food and fuel prices, was estimated at about 5.4 percent in January, slightly softer than a downward revised December figure of 5.6 percent, according to an estimate made by two analysts from inflation figures released on Tuesday.