Price rises slowed for a second month in a row but the cost of living remains close to a 40-year high.
Inflation, which measures the rate of price rises, fell to 10.5% in the year to December, compared to 10.7% in November, official figures show.
The drop was due to fuel prices falling along with clothing and footwear prices; however, this was offset by rising costs in restaurants and hotels.
The cost of food also continued to rise and there was a big jump in air fares.
Inflation is the increase in the price of something over time and to calculate it, the Office for National Statistics (ONS) keeps track of the prices of hundreds of everyday items.
If it falls, it does not mean the prices of goods are going down, it just means prices are rising more slowly.
Some analysts believe that the cost of living may now slowly be beginning to ease.
But at 10.5% UK inflation is still way above the 2% the Bank of England is charged with keeping inflation at.
Prices have been rising steadily in the UK since the Covid pandemic and the war in Ukraine has increased costs for households further, with energy and food costs soaring in recent months.
Grant Fitzner, chief economist at the ONS, said petrol prices had dropped 8p per litre last month, while diesel had fallen by 16p per litre.
"It is important to point out although we've seen a second consecutive easing, it is fairly modest fall and inflation is still at a very high level with overall prices rising strongly," he added.
Chancellor Jeremy Hunt said while any fall in inflation was "welcome", it was "vital" that the government took "difficult decisions" to try to bring it down further.
Prime Minister Rishi Sunak has pledged to halve inflation this year, but many forecasters have predicted will happen as the cost of energy falls.
"High inflation is a nightmare for family budgets, destroys business investment and leads to strike action, so however tough, we need to stick to our plan to bring it down," Mr Hunt said.
Source: BBC
Image: Pixabay
