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

The cost of food and non-alcoholic drinks climbed 5.1% over the year. Beef, butter, milk and chocolate recorded the largest increases.

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

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

Bank of England likely to hold rates

Inflation remains above the Bank of England’s 2% target. Analysts widely expect no change in interest rates this week.

Chancellor Rachel Reeves acknowledged the pressure on families. She pledged to reduce costs and support households 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 tax increases, 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 Europe

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 in 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 higher employer National Insurance Contributions pushed business costs up, which companies passed on 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 increased 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 prices eased as retailers cleared summer stock.

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

Interest rate cuts remain uncertain

ING economist James Smith said inflation 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 rate 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 face rising costs

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 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.