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UK Inflation: Food Prices Rise At Fastest August Rate In 27 Years

September 14, 2022

Food prices soared at their fastest rate in 27 years in August, compared with July, official figures show.

But falling petrol prices meant the overall inflation rate slowed slightly in the year to August, the Office for National Statistics (ONS) said.

Prices are rising faster than wages, putting pressure on household budgets.

The Bank of England has said inflation could top 13% this year, and is expected to keep raising interest rates to try and control it.

In general prices rose at nearly their fastest rate in 40 years in August, driven by the pace of food price rises.

In August food and soft drink prices rose by 1.5% compared with July. This was the largest July to August rise since 1995.

Food prices have been going up around the world following Russia's invasion of Ukraine, which has been one of the factors pushing up prices at supermarket tills.

The war has disrupted supplies from the two countries, which are major exporters of goods such as sunflower oil, wheat, and fertiliser.

However, inflation - a measure of price rises - dipped to 9.9% in the 12 months to August, from 10.1% in July, as petrol and diesel prices fell, the ONS said.

Petrol prices fell by 14.3p per litre between July and August, while diesel prices also dipped.

Fuel prices have been surging, driven by the war in Ukraine, and moves to reduce Europe's dependence on Russian oil.

But wholesale costs fell after fears of a recession in the US hit demand for oil.

Some economists have suggested that Liz Truss' plan to limit rises in energy bills could slow inflation further.

Under her plan, which was announced last week to try and prevent widespread hardship, a typical household energy bill will be capped at £2,500 annually until 2024. Businesses will also get help, with prices capped for six months.

Investment bank Goldman Sachs said a cap on bills for households could see inflation peak at 10.8% in October, rather than the 14.8% it forecast before.

Inflation is the pace at which prices are rising. For example, if a bottle of milk costs £1 and that rises by 5p compared with a year earlier, then milk inflation is 5%.

Central banks around the world, including the Bank of England, have been trying to get soaring inflation under control by hiking interest rates.

The Bank had been widely expected to increase rates again on Thursday, but it postponed that decision following the death of Queen Elizabeth II.

The Monetary Policy Committee's decision will now be announced on 22 September.

Economists say the Bank is still likely to raise rates, despite this slight easing in the inflation rate.

"This is the first time that the inflation rate has fallen since September last year, and will be reassuring to businesses," said Kitty Ussher, chief economist at the Institute of Directors.

But she warned that the easing inflation rate is due to changes in the price of petrol and diesel, which is driven predominantly by the international price of oil rather than by domestic factors.

"[This] means today's news is unlikely to alter expectations of a rise in interest rates when the Bank of England meets next week," she said.

The rate of price rises for UK products and services such as dairy and personal care items continued to go up in August, she said.

"It is home-grown inflationary pressures such as these that are the main concern of the Bank of England," Ms Ussher added.






















Source: BBC
Image source: Pixabay