Food prices spark inflation record

Inflation soared to its highest level in nearly a decade, according to official data released on Wednesday, increasing to 3.2 per cent in August, partly driven by higher prices for food.

The biggest monthly rise since records began in 1997 takes inflation way above the Bank of England’s 2 per cent target and was higher than the City had predicted.

“Record inflation is a sign of things to come,” said Yael Selfin, chief economist at KPMG. “While inflation may ease slightly in September, it is expected to remain elevated and could climb higher during subsequent months.

“Recruitment difficulties, cost pressures for businesses, supply chain issues and structural changes post-Covid are all pointing to higher inflation until at least the end of this year.” Although economists said the 1.2 percentage point jump was likely to be a one-off, the Bank of England has already forecast that inflation could hit 4 per cent by the end of the year.

The record rise was also driven by last year’s temporary VAT cut.

But the Office for National Statistics said food and non-alcoholic drink prices rose by more than last year, helping to push up the rate.

The monthly increase underlines the challenge the Bank faces as it tries to manage the post-Covid recovery.

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