UK inflation edges down, but food prices surge

STORY: British price rises have eased back from the 41-year highs hit last year.

Wednesday's official data showed annual consumer price inflation fell to 10.5% in December - slightly down from November's 10.7%.

Though it was still higher than in markets like the U.S. and Germany.

Lower prices for petrol and clothes pushed down the headline rate.

But households still felt the pressure as food and drink prices rose at the fastest pace since the 1970s.

The cost of food and non-alcoholic drinks was 16.8% higher than a year before.

British Finance Minister Jeremy Hunt:

''Well, what these figures show is that there is still a long way to go in the battle against inflation. Any country in the world with inflation over 10 per cent is seeing it at frankly dangerous levels for the stability of an economy."

December's slight drop in inflation offered some comfort to the Bank of England.

It has forecast the headline CPI would drop from a peak of 11.1% last October to around 5% by the end of this year.

But policymakers have warned of upward pressure on inflation from a tight jobs market and other factors.

High energy prices are also still a drag on the economy.

Financial markets expect the central bank to raise its main interest rate to 4% in February - up from 3.5%

Sterling strengthened against the U.S. dollar after the data was released.