Food inflation blow for Bank of England

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The rise threatens to push inflation even higher - and dashes lingering hopes of a cut in interest rates tomorrow which could have brought some relief for hard-pressed households.

The pound fell against the dollar to $1.77 as fears grew over the UK economy.

The British Retail Consortium said food prices were 10 per cent higher last month than a year ago, driven by the soaring cost of fresh produce.

Pork, in particular, went up as farmers passed on the increased cost of grain used to feed pigs. Farmers are also struggling with the high cost of fuel despite recent falls in the oil price.

Overall shop prices, including everything from clothes and furniture to electrical goods and books, went up 3.8 per cent last month, the fastest rate of shop price inflation on record.

Mike Watkins, of Nielsen, which compiled the report with the BRC, said: "Shop price inflation is likely to continue through the autumn but we are hopeful the acceleration in cost prices that has driven food prices up so sharply is starting to slow."

Soaring food prices have seen customers switch to discount retailers such as Aldi and Lidl.