Food prices rose again in August, marking the fifth consecutive monthly increase. Official figures show the fastest rise 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 steepest increases.

Slower growth in other areas, 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 expected to maintain rates

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

Chancellor Rachel Reeves admitted families are feeling the pressure. 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 moves would push prices further.

Reeves promised no new borrowing or additional taxes, but speculation around the November Budget continues.

Shadow chancellor Sir Mel Stride described inflation as “deeply worrying” and said Labour’s policies are contributing to rising costs.

UK inflation outpaces European peers

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

It said UK inflation is much 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” compared with other major economies.

She said higher employer National Insurance Contributions increased business costs that were then passed on to consumers.

Rising costs for everyday essentials

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

The British Retail Consortium warned food inflation is outpacing wage growth, which reached 4.7% between May and July.

Director Kris Hamer said families are struggling as wages fail to keep up. Clothing and footwear prices eased thanks to summer discounts.

Cereals and pasta also fell slightly 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.

Small 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 doubled supplier costs. A 10kg batch once costing £60 now exceeds £150.

Butter prices have risen 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 improve productivity.