Food prices increased again in August, the fifth monthly rise in a row. Official figures show the fastest pace since early last year.

The cost of food and non-alcoholic drinks climbed 5.1% over the year. Beef, butter, milk and chocolate saw the sharpest jumps.

Slower growth in areas such as air fares held overall 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 faces tough choices

Inflation remains well above the Bank of England’s 2% target. Analysts expect the central bank to keep interest rates steady this week.

Chancellor Rachel Reeves said she knows families are struggling. She promised to bring down costs and help households with rising bills.

Her first Budget included higher employer National Insurance Contributions and a rise in the minimum wage. Businesses warned both measures would raise consumer prices.

Reeves said she will avoid new borrowing or further tax increases. Still, speculation grows about possible tax moves in the November Budget.

Shadow chancellor Sir Mel Stride called price growth “deeply worrying”. He argued Labour’s policies are stoking inflation.

UK inflation outpaces European economies

The Office for National Statistics reported food and drink prices up 5.1%, the highest increase in 19 months.

It noted UK inflation stands well above levels in France and Germany. France recorded 0.8% in August, while Germany posted 2.1%.

KPMG’s chief economist Yael Selfin said Britain has become an “outlier” compared with other major economies.

She blamed domestic policy choices, especially higher employer National Insurance Contributions, for pushing up business costs.

Essentials lead the surge

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

The British Retail Consortium warned food inflation is now higher than wage growth, which averaged 4.7% between May and July.

Director Kris Hamer said families are struggling as prices rise faster than earnings. Clothing and footwear prices fell as retailers discounted summer stock.

Staple goods like cereals and pasta also declined slightly in August.

Interest rate cuts less likely

ING economist James Smith said the 3.8% figure complicates the Bank of England’s rate decisions.

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

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

Capital Economics doubts a cut in November. But economist Paul Dales predicted weaker wage growth will bring inflation closer to levels in the US and eurozone.

He forecast rates will fall from 4% to 3% by the end of next year.

Bakeries feel rising costs

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

Bad weather in cocoa regions has doubled supplier costs. A 10kg batch once costing £60 now exceeds £150.

Butter has risen 50% in a year as milk imports dropped. Lower supply has driven prices higher.

Egan added that higher National Insurance Contributions have also hurt. His bakery now delays investing in equipment and technology to raise productivity.