FOOD prices have rocketed by more than 16 per cent in the run-up to Christmas — despite overall inflation easing for the first time in more than a year.
New figures show inflation — the rate at which prices rise — is still stuck at a near 40-year high at 10.7 per cent.
Despite the dip in November, the Office for National Statistics warned against too much optimism.
Grant Fitzner, chief economist at the ONS, said: “Some may be calling this a peak. I think it’s too early.
“We’ve only seen one fall from a 40-year high. Let’s wait a few months and see how it goes.”
Shoppers are still facing huge price increases on everyday essentials, with food prices up by 16.4 per cent — the highest in 45 years.
Staples such as bread cost a fifth more than a year ago, tea is up by 10.5 per cent and beer is up by 5.4 per cent.
Chancellor Jeremy Hunt warned he expected the economic situation to get worse but said inflation was “the number one enemy that makes everyone poorer.”
He said: “If we make the wrong choices now, high prices will persist and prolong the pain for millions”.
The bigger slip than expected has given economists further confidence that inflation has now peaked.
Traders now bet inflation will reduce to 7.4 per cent next year and 2.5 per cent in 2024.
And the CBI said the drop means that “we’ve likely passed its peak.”
Alpesh Paleja, CBI lead economist said: “We expect inflation to continue falling gradually over the year ahead, as global price pressures ease and an economic downturn takes some of the heat out of price setting.
“Despite this, costs and price pressures will likely remain very high in the near-term, putting continued pressure on vulnerable households and businesses.”
The fall has also triggered speculation interest rates may not have to rise quite so much when the Bank of England meets tomorrow.
A rise of 0.75 percentage points had been predicted amid fears inflation could hit 13 per cent.
But analysts reckon an increase of 0.50 percentage points could be on the cards at lunchtime, taking interest rates to 3.5 per cent — still the highest level for 14 years.
The Bank has faced criticism for being too slow to tackle inflation in a bid to bring it down to its target two per cent.
There had been fears the Bank might have to hike interest rates to six per cent to bring down inflation but since the government launched its energy support relief traders now think the highest level will be 4.5 per cent.