Inflation has slipped below the Bank of England's 2% target for the first time in over four years, official figures from the Office for National Statistics showed.
The fall is likely to bolster the Bank of England's argument for there to be no need to raise interest rates yet, as the UK's inflation rate as measured by the consumer prices index fell to 1.9% - below the Bank's 2% target - in January.
Inflation as measured by the Retail Prices Index (RPI) rose to 2.8%, up from 2.7% in December.
Chief Secretary to the Treasury Danny Alexander said: "Inflation falling below 2% for the first time since November 2009 is further evidence that our long-term economic plan is working.
"Controlling inflation and rebuilding our economy are the only sustainable ways to secure living standards for the future."
However, critics warned that despite the falling inflation, the fact that prices are still rising faster than wages means that many Britons would still suffer a cost of living crisis.
Labour's shadow Treasury minister Cathy Jamieson said: “This small fall in the inflation rate is welcome, but with prices still rising much faster than wages the cost-of-living crisis continues. Under David Cameron working people are now on average £1600 a year worse off."
Bank of England governor Mark Carney said last week: “The inflation environment is more benign than we had anticipated."
He made clear that any interest rate rises would not happen for the near term and would only be "gradual" when they do.
Inflation is expected to keep falling during 2014, with the Bank of England estimating it will be overtaken by wage growth in the latter half of this year.
Jeremy Cook, chief economist at foreign exchange company World First, said: “While this one swallow does not make a summer, we would hope to see a trend of lower inflation over the course of 2014. This should allow for the gap between prices and wages to lessen."