Food prices rose again in August, the fifth monthly increase in a row. Official data shows the fastest growth since early last year.

The cost of food and non-alcoholic drinks rose 5.1% compared with a year earlier. Beef, butter, milk and chocolate saw sharp increases.

Other costs, including air fares, rose more slowly, leaving overall inflation unchanged at 3.8%, the same as in July.

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

Bank likely to hold interest rates

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

Chancellor Rachel Reeves admitted families face hardship. She promised to bring down costs and help households struggling with higher bills.

Her first Budget raised employer National Insurance Contributions and the minimum wage. Businesses warned those moves would push up prices.

Reeves pledged not to return with new borrowing or tax rises. Still, speculation grows about changes in the November Budget.

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

UK diverges from Europe

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

It pointed out that UK inflation is far higher than in France and Germany. 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 said higher employer National Insurance Contributions raised business costs that were then passed on to consumers.

Essentials drive price surge

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

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

Director Kris Hamer said families are struggling as prices rise faster than earnings. Clothing and footwear prices fell thanks to seasonal discounts.

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

Rate cuts still uncertain

ING economist James Smith said inflation stuck at 3.8% complicates the Bank of England’s next steps.

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

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

Capital Economics doubts rates will fall in November. But economist Paul Dales expects weaker wage growth to push inflation closer to US and eurozone levels.

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

Small firms under strain

Tom Egan, who runs Coosh Bakery in Nottingham with his wife, said rising butter and chocolate costs are squeezing his business.

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

Butter prices climbed 50% in a year as milk imports fell. Lower supply sharply raised costs.

Egan said higher National Insurance Contributions have also hurt. His bakery now delays investment in new equipment and technology to improve productivity.