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Food prices in UK shops jump, add to inflation pressures

[LONDON] Food prices in British shops increased last month at the fastest pace in almost four years, according to industry figures that could bolster the case of Bank of England officials who want higher interest rates.

The British Retail Consortium (BRC) said annual food price inflation hit 2.2 per cent in September, up sharply from 1.3 per cent in August and its highest since November 2013.

The figures add to recent surveys of businesses that have suggested inflationary pressure in Britain is building again, despite few signs that economic growth will improve after a weak first half of the year.

Last month the BOE surprised investors when it said most of its officials believed an increase in interest rates would probably be needed soon as they become less tolerant of inflation that is running above their target, thanks in large part to the impact of last year's Brexit vote.

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Overall shop prices fell by an annual 0.1 per cent in September, the BRC said, the smallest drop since May 2013 when supermarkets began a price war to compete for customers.

A global milk shortage and an increase in cereal prices earlier in the year had contributed to the rise in food inflation, it said.

"Stretched family budgets will continue to feel the strain as increases in the price of the weekly shop add to overall rising inflation which continues to outpace wage growth," said Helen Dickinson, BRC chief executive.

A majority of economists polled by Reuters last month expected the BOE will raise interest rates in November, although most also thought it would be a mistake to do so that soon.

REUTERS