Food prices climbed again in August, marking the fifth consecutive monthly rise. Official figures show the fastest increase since early last year.

The cost of food and non-alcoholic drinks rose 5.1% over the year. Beef, butter, milk and chocolate recorded the largest increases.

Other areas, including air fares, grew more slowly, keeping overall inflation steady at 3.8%, the same as July.

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

Bank of England likely to pause

Inflation remains above the Bank of England’s 2% target. Analysts expect interest rates to remain unchanged at this week’s meeting.

Chancellor Rachel Reeves acknowledged the strain on families. She pledged to bring costs down and support households facing higher bills.

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

Reeves promised no new borrowing or tax increases, though speculation about November’s Budget is mounting.

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

UK inflation outpaces Europe

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

It said UK inflation remains higher than in other 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” among major economies.

She said higher employer National Insurance Contributions raised business costs, which companies passed on to consumers.

Everyday essentials hit hardest

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

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

Director Kris Hamer said families are struggling as pay fails to keep pace. Clothing and footwear prices eased as shops discounted summer stock.

Cereals and pasta also fell slightly in August.

Interest rate cuts uncertain

ING economist James Smith said inflation holding 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 this week.

Capital Economics doubts a November rate cut. But economist Paul Dales expects weaker wage growth to bring inflation closer to US and eurozone levels.

He forecast rates will fall from 4% to 3% by late next year.

Small businesses feel the squeeze

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

Poor cocoa harvests more than doubled supplier prices. A 10kg batch once costing £60 now exceeds £150.

Butter prices have jumped 50% in a year as milk imports declined. Lower supply has pushed costs higher.

Egan said higher National Insurance Contributions have also “stung”. His bakery has delayed investing in equipment and technology that could improve productivity.