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Inflation in August remained steady at 3.8%, according to the latest official figures, as the cost of food continued to increase. The rate of price growth matched July’s inflation rate, but while certain expenses like airfares saw a decrease, food became more costly with prices of cheese, fish, and vegetables all on the rise. This trend in food price inflation has persisted for the past five months, with experts attributing it to supermarkets passing on government-mandated raises in the minimum wage and National Insurance Contributions (NIC) to consumers through higher prices.
The overall inflation rate continues to exceed the Bank of England’s 2% target, prompting speculation that the rate-setting committee will maintain interest rates during its upcoming meeting. Chancellor Rachel Reeves, who is scheduled to unveil the government’s tax and spending plans in the Budget later this month, empathized with the difficulties faced by families due to the current economic challenges. She emphasized her commitment to reducing costs and aiding those grappling with escalating bills. Reeves’ previous fiscal measures, including a rise in National Insurance Contributions for employers and an increase in the minimum wage, sparked backlash from businesses concerned about the impact on consumer prices.
Amidst growing concerns about inflation, Shadow chancellor Sir Mel Stride criticized the price growth as “deeply worrying for families” and pointed to Labour’s tax policies as contributing to the inflationary pressure. The Office for National Statistics (ONS) reported a 5.1% surge in food prices in August compared to the previous year, marking the highest increase in 18 months. Additionally, the ONS noted that UK inflation surpassed the figures seen in major European economies like France and Germany, hinting at the distinctly elevated cost of living in Britain in recent months compared to its European counterparts.
As Yael Selfin, chief economist at KPMG UK, highlighted, the decision to raise employers’ National Insurance Contributions has played a significant role in driving inflation in the country, with businesses passing on the resultant costs to consumers. The British Retail Consortium (BRC) echoed concerns about food price inflation outpacing wage growth, making it challenging for many households to cope with the rising cost of living. Although the prices of certain goods like clothing and footwear exhibited a decline, key food essentials witnessed a price hike, posing additional financial strain on consumers. This persistent inflation poses a challenge for the Bank of England, potentially influencing future decisions regarding interest rates
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