Food prices rose again in August, marking the fifth consecutive monthly increase. Official data shows the fastest growth since early last year.

The cost of food and non-alcoholic drinks increased 5.1% over the year. Beef, butter, milk and chocolate led the rises.

Slower growth in other areas, including air fares, kept overall inflation steady at 3.8%, the same as July.

Economists said supermarkets are passing higher minimum wage and National Insurance costs directly to consumers.

Bank of England likely to hold rates

Inflation remains above the Bank of England’s 2% target. Analysts widely expect interest rates to stay unchanged this week.

Chancellor Rachel Reeves acknowledged the pressure on households. She pledged to reduce costs and support families facing higher bills.

Her first Budget raised the minimum wage and employer National Insurance Contributions. Businesses warned these measures would push prices higher.

Reeves promised no new borrowing or additional taxes, though speculation about the November Budget continues.

Shadow chancellor Sir Mel Stride called the figures “deeply worrying” and said Labour’s policies are fuelling inflation.

UK inflation outpaces European countries

The Office for National Statistics reported the fastest rise in food and drink prices in 19 months.

It said UK inflation remains far higher than other major European economies. France recorded 0.8% in August, while Germany posted 2.1%.

Yael Selfin, chief economist at KPMG, said Britain has become an “outlier” among major economies.

She noted that higher employer National Insurance Contributions pushed business costs up, which companies passed to consumers.

Essentials push household budgets higher

Beef and veal prices rose nearly 25% in the year to August. Butter climbed almost 19%, while chocolate rose 15.4%.

The British Retail Consortium warned food inflation is outpacing wages, which grew 4.7% between May and July.

Director Kris Hamer said families are struggling as pay fails to keep pace. Clothing and footwear costs eased as retailers cleared summer stock.

Staples such as cereals and pasta also saw slight price drops in August.

Interest rate cuts remain uncertain

ING economist James Smith said inflation stuck at 3.8% complicates Bank of England decisions.

He warned food inflation could rise further before year-end. The Bank has already cut rates five times since last August, lowering borrowing costs to 4%.

Officials expect inflation to peak at 4% in September. Analysts widely predict no change in rates this week.

Capital Economics doubts a November cut. But economist Paul Dales expects weaker wage growth to bring UK inflation closer to US and eurozone levels.

He forecast rates will fall from 4% to 3% by late next year.

Local bakeries feel the impact

Tom Egan, who runs Coosh Bakery in Nottingham with his wife, said rising butter and chocolate prices are hitting hard.

Poor cocoa harvests more than doubled supplier costs. A 10kg batch once priced at £60 now exceeds £150.

Butter prices have jumped 50% in a year as milk imports fell. Lower supply has pushed costs higher.

Egan said higher National Insurance Contributions have also “stung”. His bakery has delayed investment in equipment and technology that could boost productivity.