Food prices rose in August for the fifth month in a row. Official figures show the sharpest increase since early last year.

The cost of food and non-alcoholic drinks grew at an annual rate of 5.1%. Beef, butter, milk and chocolate drove the rise.

Slower growth in areas such as air fares kept overall UK inflation steady at 3.8%, unchanged from July.

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

Bank of England holds steady

Inflation remains above the Bank of England’s 2% target. Markets expect the committee to keep interest rates unchanged this week.

Chancellor Rachel Reeves said families face tough times. She promised to bring down costs and support households hit by rising bills.

Her first Budget included higher employer National Insurance Contributions and an increase in the minimum wage. Businesses warned these changes would raise prices.

Reeves promised not to return with more borrowing or tax hikes. Still, speculation grows over possible measures in the November Budget.

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

UK outpaces European rivals

The Office for National Statistics said food and drink prices rose 5.1%, the steepest jump in 19 months.

It highlighted that UK inflation is higher than in France and Germany. France reported 0.8% in August, while Germany posted 2.1%.

KPMG’s chief economist Yael Selfin said Britain had become an “outlier” compared to other economies.

She blamed domestic policies, particularly the rise in employer National Insurance Contributions, for adding to business costs passed on to shoppers.

Essentials drive the surge

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

The British Retail Consortium warned food inflation is outstripping average wage growth of 4.7% between May and July.

Its director Kris Hamer said families are struggling as prices rise faster than pay. Clothing and footwear prices eased, helped by summer discounts.

Staple foods such as cereals and pasta also saw small declines in August.

Interest rate cuts in doubt

ING economist James Smith said the 3.8% rate makes further cuts from the Bank of England less likely this year.

He warned food inflation may rise further before year-end. The Bank has already cut rates five times since last August, reducing 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 cut will come in November. But economist Paul Dales expects weaker wage growth will bring inflation closer to levels in the US and eurozone.

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

Bakers feel the impact

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

Poor weather in cocoa regions has more than doubled supplier costs. A 10kg batch once priced at £60 now costs over £150.

Butter prices have risen by 50% in a year as milk imports declined. Reduced supply has driven costs sharply higher.

Egan said the rise in National Insurance Contributions has also hurt. His bakery now delays investing in equipment and technology that could improve productivity.