ANNUAL UK consumer prices index inflation dipped marginally from 3.1 per cent to three per cent in December, but remained well above target as the year-on-year surge in food prices continued, official figures show.

Scottish Chambers of Commerce highlighted continuing inflationary pressures in the wake of yesterday’s data from the Office for National Statistics. While annual CPI inflation fell last month for the first time since June 2017, it remained one percentage point higher than the two per cent target set for the Bank of England by the Treasury.

Liz Cameron, chief executive of Scottish Chambers, said: “Data from [the] Scottish Chambers of Commerce network’s economic indicator…shows signs of companies potentially seeking to increase prices as it becomes more difficult for firms to absorb increasing cost pressures.”

She flagged continuing pressure on household budgets as she urged the Bank of England not to raise UK base rates further from their current level of 0.5 per cent in the near term. The Bank raised rates by a quarter-point, from a record low of 0.25 per cent, in November.

Ms Cameron said: “Wage growth continues to lag well behind [inflation] and it will be some time before this translates into people having more money in their pockets. The Monetary Policy Committee should be in no rush for another rate hike. Keeping interest rates steady is the preferred option for business.”

Air fares exerted a downward influence on the annual CPI inflation rate between November and last month because, although they rose by a similar magnitude to a year earlier, they were a smaller part of the basket of goods and services in December 2017.

The price of food and non-alcoholic beverages in December was up by 3.9 per cent on the same month of 2016, according to the ONS data. Food prices have surged as sterling’s post-Brexit vote weakness has raised the cost of imports. And an increase in petrol and diesel prices between November and December exerted an upward effect on the annual CPI inflation rate.

Noting the dip in annual CPI inflation from 3.1 per cent in November to three per cent, Ms Cameron said: “Whilst it is too early to say whether this is the start of a long-term reduction in the rate of inflation, the reduced rate will begin to ease some of the pressure on household budgets. However, food inflation still remains at a near-four-year-high and petrol prices rose sharply as the continued impact of Brexit and rising commodity and raw materials [prices] passed through supply chains.”

Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “Inflation of three per cent in December still keeps the squeeze very much on consumers – indeed it undoubtedly marked another month of negative real income growth. The squeeze on consumers’ purchasing power remains appreciable going into 2018. However, it should ease as the year progresses due to inflation falling back towards two per cent by the end of the year.”

Annual inflation on the old all-items retail prices index measure rose from 3.9 per cent in November to 4.1 per cent last month.