Inflation fell to 3% in December from 3.1% in November, according to official statistics
Nancy Curtin, chief investment officer at Close Brothers Asset Management, said: “Consumers will breathe a sigh of relief that escalating living costs are showing signs of abating.
“The Brexit vote brought with it the side effect of depreciating sterling, and the subsequent rise in import costs, pushing inflation well beyond the Bank of England’s target.
“These effects are dissipating somewhat, and core inflation remains lower still. Despite falling inflation, real term wage growth remains elusive.
“Household finances will continue to feel tight until wages pick up in real terms, and this will rein in the consumer spending that is so vital to our service-led economy.”
Samantha Seaton, CEO of Moneyhub, said: “Despite a slowdown in inflation, we have still seen almost a year of consistent prices take their toll on consumers, who have already been squeezed by stagnant wage growth and a hike in interest rates. This tricky combination will leave many people with difficult spending decisions to make, in an even more challenging saving environment.
“High inflation poses a real threat to household budgets. Increasing food, energy and rail prices are causing a financial squeeze and it is even more important for consumers to track their outgoings vs. income in this tough environment.
“Using a tool or platform to help track expenditure can be a huge support, especially where nudges can be sent to help consumers secure better rates for mortgages, credit cards or energy bills.”