Food inflation at 18-month high - and experts predict worse to come

Inflation has remained relatively high, meaning goods are becoming more expensive, particularly the cost of food, official figures show.

The rate of price rises remained at 3.8% in August, the same as in July, according to data from the Office for National Statistics (ONS).

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Food and non-alcoholic drinks price rises, however, accelerated from 4.9% to 5.1%, far higher than the headline rate and other measures of inflation.

It's the fifth monthly rise in a row and the first time in 18 months such a high has been reached.

"Small increases" were seen in vegetables, cheeses and fish, the ONS said.

Economic research firm Pantheon Macroeconomics has forecast it will peak at 6% in December.

Prices are expected to continue rising, with the Bank of England forecasting the rate will hit 4% in September.

Such a high is double the central bank's 2% target, meaning interest rates - and the cost of borrowing as a result - could remain higher for longer.

Why?

Latest headline data was unchanged as airfares rose less sharply in August this year, compared with last, though this was offset by hotel prices falling less sharply and more expensive petrol.

Oasis gigs across Britain likely contributed to higher accommodation costs.

The rise in food inflation follows the hottest UK spring and summer on record, which impacted crop growth and animal feeding, and resulted in one of its worst harvests in decades.

Increased wage bills through higher minimum wage and employers' national insurance contributions were said to be behind the high figure, the Food and Drink Federation said.

The British Retail Consortium added a new packaging tax was upping business costs.

Behind the headline figure

Other measures of inflation slowed.

Core inflation, which strips out volatile food and energy prices and is closely watched by the rate-setters at the Bank of England, fell back to 3.6% from 3.8% last month.

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Similarly, services inflation, which tracks prices in the biggest part of the UK economy, dropped back to 4.7% from 5% in July.

Responding to the data, Chancellor Rachel Reeves said:

"I know families are finding it tough and that for many the economy feels stuck. That's why I'm determined to bring costs down and support people who are facing higher bills.

"We are taking action - raising the national living wage, extending the £3 bus fare cap, and expanding free school meals, to put more money in people's pockets while we work to build a stronger, more stable economy that rewards hard work".

(c) Sky News 2025: Food inflation at 18-month high - and experts predict worse to come