Inflation fell to a record low of 0.3% last month, with food and petrol prices plunging sharply to keep a lid on the rise in the cost of living.
The Consumer Price Index (CPI) measure of inflation has not been lower since the start of records in 1989, according to the Office for National Statistics.
It means a basket of goods and services that cost £100 in January 2014 would have been just 30p more last month.
According to an experimental model created by the ONS last year, CPI was last lower in March 1960, when it was -0.6%.
Bank of England forecasts suggest inflation will turn negative for the first time in five decades during the next few months before recovering later this year.
Chancellor George Osborne said the lowest CPI inflation ever was a milestone for the British economy.
“It’s great news for families, whose budgets will stretch even further. It shows that those who went around predicting a cost of living crisis were plain wrong,” he stated.
“It demonstrates the clear choice between a long-term economic plan that’s delivering stability and rising living standards, and the chaos of the alternatives.”
He added: “We will remain vigilant to all risks, particularly when the global economic situation is so uncertain.”
Prime Minister David Cameron said: “Let’s stick to the plan that’s raising living standards.”
Shadow treasury minister Cathy Jamieson MP said the fall in inflation was due to plummeting global oil prices.
She continued: “In Britain wages continue to be sluggish and working people are £1,600 a year worse off under this Government.
“A few months of falling world oil prices won’t solve the deep-seated problems in our economy.”
The supermarket price war saw food and non-alcoholic beverage prices fall by 2.5% year on year, the steepest rate on records going back to 1997.
It was driven by a 3.5% fall in the cost of milk as warring supermarkets cut the cost of two-pint cartons.
Transport costs fell by 2.8% year on year, the steepest rate on record, driven by a 16.2% fall in fuels.
The average petrol price fell by 8.5p per litre over the course of January, while for diesel it fell 7.3p.
This left petrol at 108.3p, its lowest level since November 2009, and diesel at 115.6p, its lowest since February 2010.
The price of beer and clothes also fell, the latter by less than usual in January after much discounting took place before Christmas.
Inflation is predicted to fall further over coming months because of energy tariff cuts, but policy makers want to avoid plunging into a sustained spiral of falling prices, putting consumers off purchases and deterring businesses from investment.