Food prices climbed again in August, marking the fifth straight monthly increase. The jump was the fastest since early last year.

The cost of food and non-alcoholic drinks rose 5.1% over the year. Beef, butter, milk and chocolate saw the biggest rises.

Other sectors, including air fares, rose more slowly. That kept overall inflation unchanged at 3.8%, the same as July.

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

Bank of England under pressure

Inflation remains well above the Bank of England’s 2% target. Analysts expect rates to stay on hold this week.

Chancellor Rachel Reeves admitted families are struggling. She pledged to reduce costs and support households hit by higher bills.

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

Reeves promised no new borrowing or tax rises. Still, speculation about possible changes in the November Budget is growing.

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

UK inflation gap with Europe widens

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

It highlighted that UK inflation is far higher than in other large European economies. France recorded 0.8% in August, while Germany posted 2.1%.

Yael Selfin, chief economist at KPMG, said Britain had become an “outlier”.

She said domestic policies, especially the rise in employer National Insurance Contributions, increased costs that businesses passed to consumers.

Essentials see steep increases

Beef and veal prices jumped nearly 25% in the year to August. Butter rose almost 19%, while chocolate climbed 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 lag behind prices. Clothing and footwear prices eased as shops cleared summer stock.

Cereals and pasta also fell slightly in price during August.

Interest rate outlook remains uncertain

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

He warned food inflation could climb further by 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 rates will fall in November. But economist Paul Dales predicted weaker wage growth will bring UK inflation closer to US and eurozone levels.

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

Small businesses count the cost

Tom Egan, who runs Coosh Bakery in Nottingham with his wife, said higher butter and chocolate prices have hit hard.

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

Butter prices have surged 50% over the year as milk imports declined. Reduced supply has pushed costs up.

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