Falling fuel prices are expected to have helped UK inflation ease back again last month, offering further signs that the peak of the cost of living crisis has passed.
The Office for National Statistics (ONS) has revealed that the rate of Consumer Prices Index (CPI) inflation falling to 10.5% in December, from 10.7% in November.
It is thought that sharp drops in the prices at petrol pumps is behind the decline, which would mark the second month in a row that the rate of inflation has dropped back.
CPI has eased since the eye-watering 41-year high of 11.1% seen in October, when soaring energy bills pushed up the cost of living.
Samuel Tombs at Pantheon Macroeconomics is pencilling in an even greater fall in CPI for December, to 10.3% as he said the figures will “provide more evidence that price rises are slowing”.
He added that there may be some relief in store for households, who have faced sky-high bills for their weekly shop, saying that the report should “bring signs that the surge in food prices is petering out”.
It comes after Britons have been hit by steadily rising inflation throughout 2022 as the cost of living crisis peaked, pushed higher by rocketing energy bills, while essentials have also jumped higher across the board.
Food and drink prices hit 16.4% in November - the highest for 45 years - added to the strain felt by families across the UK.
Investec economist Philip Shaw said: “For December, we expect the biggest influence to be petrol prices, which declined by close to 5% on the month, against a flat outturn 12 months earlier.
“In addition clothing and footwear prices may also have fallen back as retailers returned to seasonal discounting.”
But experts believe the marked slowdown in the rate of inflation is unlikely to stop the Bank of England from hiking interest rates once more at its February meeting, as it looks to rein in wider cost pressures in the economy; with workers still demanding higher wages.
Alpesh Paleja, the CBI’s lead economist, said: “Over the coming year, inflation should fall further towards single digits, as global price pressures ease and an economic downturn takes some of the heat out of price setting.
“Despite this, the cost-of-living crisis will continue to be a very real problem for both households and businesses, as price pressures remain high in the short-term.
“Against the backdrop of a recession firms will continue to face higher costs and weak demand conditions,“ he continued, adding: “If the government is going to solve these twin problems, then it needs to continue supporting measures like the Energy Bills Discount Scheme, while enacting a series of pro-growth measures to spur the economy.”
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