Consumer price rises dipped in the UK in December, with upstream inflationary pressures easing more sharply than expected as fuel and materials costs edged lower.
The headline consumer price index (CPI) showed the annual rate of inflation dipped to 3% in December in line with market forecasts, down from 3.1% in November.
Breaking down the data showed that the impact of rising oil prices was largely offset by the falling costs of air travel.
Relief for households
Had the annual rate remained at 3.1% or moved higher, the Bank of England's governor Mark Carney would have been obliged to write another letter of explanation to Chancellor of the Exchequer Philip Hammond.
It remained too early to predict a rebalance between inflation and wage growth - the pace of annual wage growth at 2.5% still lags inflation - but pressures on household budgets were expected to see some relief in the coming months.
Jacob Deppe, head of trading at Infinox, said: "Continuing price rises are unhelpful for households struggling with below inflation wage rises but perhaps there is a chink of light at the end of the tunnel.
“For the moment the simple fact is wages are still running below living costs even if the gap has narrowed ever so slightly."
Inflation pressures easing
Carney and the monetary policy committee (MPC) would now expect that December's dip is the beginning of the drop in consumer prices that the Bank had forecast several months ago as the impact of last year's weak pound diminishes.