Food prices rose again in August, extending a run of five monthly increases. It was the fastest growth since early last year.

The cost of food and non-alcoholic drinks increased 5.1% compared with a year earlier. Beef, butter, milk and chocolate saw steep rises.

Slower price growth in other areas, such as air fares, kept overall inflation at 3.8%, the same level as in July.

Economists said supermarkets are passing higher minimum wage and National Insurance costs straight onto shoppers.

Central bank expected to hold rates

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

Chancellor Rachel Reeves acknowledged the pressure on families. She vowed to bring costs down and support households struggling with higher bills.

Her first Budget raised the minimum wage and increased employer National Insurance Contributions. Businesses warned these moves would drive prices higher.

Reeves said she would not return with new borrowing or taxes. Yet speculation about the November Budget is mounting.

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

UK outpaces European neighbours

The Office for National Statistics said food and drink prices jumped at the fastest rate in 19 months.

It noted that UK inflation remains well above European levels. 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 argued that higher employer National Insurance Contributions raised business costs, which were then passed onto consumers.

Everyday staples hit hardest

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

The British Retail Consortium warned food prices are rising faster than average wages, which grew 4.7% between May and July.

Director Kris Hamer said many families are struggling as pay lags behind costs. Clothing and footwear prices eased as shops discounted summer collections.

Cereals and pasta also became slightly cheaper during August.

Interest rate cuts in question

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

He warned food inflation could climb higher before the year ends. The Bank has already cut rates five times since August last year, reducing borrowing costs to 4%.

Officials expect inflation to peak at 4% in September. Markets broadly expect no change in rates this week.

Capital Economics doubts rates will fall in November. But economist Paul Dales predicted weaker wage growth will help bring UK inflation closer to US and eurozone levels.

He expects the Bank to cut rates from 4% to 3% by late next year.

Bakery feels the impact

Tom Egan, who runs Coosh Bakery in Nottingham with his wife, said soaring butter and chocolate prices are hurting business.

Bad weather in cocoa-growing regions doubled supplier costs. A 10kg batch once priced at £60 now costs over £150.

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

Egan said higher National Insurance Contributions have also hit. His bakery has postponed investment in new technology and equipment that could improve productivity.