New figures show that living costs remained static in November even though the price of petrol rose above £1-a-litre.

According to the Office for National Statistics, the Consumer Prices Index was unchanged at 2.1% last month, which will be well received by the Bank of England as it battles to get inflation under its 2% target.

Economists had been forecasting that CPI would rise slightly to 2.2% after oil prices in November got closer to the 100 dollars a barrel mark.

But they now believe that the latest figures may prompt policymakers at the Bank to cut rates again in the new year, after they reduced borrowing costs by a quarter-point to 5.5% earlier this month.

Rising food costs had also been expected to push inflation higher after an almost 4% surge in the price of bread, pastries and cake products pushed the annual rate of food inflation to a 14-year high last month.

However, the ONS said that falling vegetable prices - compared with rising costs last year - offset the increases recorded in the price of items such as bread, milk and cheese.

Gas and electricity bills were also little changed this year in contrast with rising costs a year ago before energy firms moved to lower tariffs, which helped keep a lid on prices.

But headline Retail Prices Index inflation, which some analysts regard as more representative because it includes mortgage payments, rose by 0.1% to 4.3%.

Jonathan Loynes, chief European economist at Capital Economics, said the inflation data is an "encouraging signal" for the Bank's Monetary Policy Committee.

He said: "There are still worries over rising cost pressures and the high levels of inflation expectations amongst both households and firms.

"But with growing signs that activity is slowing, it seems likely that these concerns will fade in time."

He added: "Overall (it is) an encouraging signal that inflation pressures will not prevent the MPC from responding to the weakening outlook for the economy by cutting interest rates further."

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