The latest inflation figures bring some respite for cash-strapped families. Inflation has finally fallen back, with food and drink becoming cheaper while petrol prices have come off their recent highs.

The data raised hopes that price pressures have now peaked and that the cost of living will come down further in coming months.

Inflation spiked to an annual rate of 3.7% in April, a 17-month high, but dropped to 3.4% in May, according to the Office for National Statistics.

Food and soft drinks prices were the main reason for the slowdown, slipping 0.1% between April and May, while the cost of alcohol dipped by 0.2%. Meat, in particular pork, has become cheaper, as well as fruit such as grapes.

And petrol prices rose less than feared.

The figures will help the Bank of England to keep interest rates low.

"May's UK consumer prices figures provided some reassurance that the monetary policy committee will be able to avoid the nightmare scenario of having to raise interest rates just as an enormous fiscal squeeze hits the economy," said Jonathan Loynes at Capital Economics.

The Bank of England, charged with keeping inflation at 2% over a two-year horizon, believes inflation will remain above 2% for the rest of the year.

"While inflation should continue to fall back through 2010 much could depend upon the strength of the global economic recovery and the demand for commodities – a stronger recovery poses dangers in terms of raw material inputs such as oil," said Richard Greenwood at the Centre for Economics and Business Research.

Another threat is a possible VAT hike from 17.5% to 20% in next Tuesday's budget.