Inflation: Milk, cheese and egg prices fall as petrol rises

Food prices saw their first monthly fall in two years in September, but fuel prices rose sharply, official figures show.

It came as the UK’s overall rate of inflation held steady at 6.7%, ending a run of three consecutive monthly falls.

The price of milk, cheese and eggs all decreased, easing the pressure at supermarket tills, the Office for National Statistics (ONS) said.

But petrol increased by 5.1p per litre, hitting drivers at the pumps.

Analysts had expected the overall rate of inflation to fall slightly, and the ONS said there may be “some disappointment” about the unchanged figure.

However, its chief economist, Grant Fitzner, told BBC Radio 4’s Today programme: “If you look across Europe, many countries have seen either periods lately of no change or in some cases of actual increases in the headline rate, before they started to resume their falls.”

Rishi Sunak said halving inflation to around 5.3% by the end of the year remained his “number one priority”.

The latest inflation figures will raise concerns about the path of UK interest rates, which the Bank of England left on hold last month.

The Bank has put up rates 14 times since 2021 in a bid to get inflation under control, and while many economists expect them to remain unchanged again in November, the mixed picture painted by September’s numbers means it’s not certain.

On Tuesday, separate figures showed wages outpaced inflation for the first time in almost two years between June and August.

However, many households remain under pressure because of the high cost of living and charities have warned things could get worse this winter.

Hannah Nagy, a mum-of-two from Stainland in West Yorkshire, told the BBC her pay had gone up by about 5% since April but that it “hasn’t really touched the sides, particularly with the cost of shopping”.

“It’s not going towards holidays or days out – it’s going towards electricity, petrol, food, shopping – day-to-day living,” the recruitment professional said.

Mrs Nagy said the pace of price rises meant she felt like she was in a better position a few years ago when she earned less but things didn’t cost as much.

High food prices have driven up inflation over the last few years, with the cost of a weekly shop soaring due to supply chain issues and the war in Ukraine.

But while food price inflation remains high, at 12.2% on annual basis, it has been easing.

The ONS said prices fell by 0.1% between August and September, led by dairy produce and soft drinks. The only food category that went up was fish, led by frozen prawns.

By contrast, the ONS said drivers were again being hit at the pumps as global oil prices rise.

Between August and September, petrol rose to an average of 153.6p per litre and diesel by 6.3p to 157.4p per litre. That was up from levels closer to 140p in June, although still well below the highs seen last year.

Oil prices jumped last month after Saudi Arabia and Russia cut their production to support the global market, and events in Israel and Palestine have sparked further increases.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said higher oil prices added to worries “that inflation will stay stubborn”.

She added that this meant the door to another interest rate hike in the UK “has been kept ajar”.

“At the very least still untamed inflation is pushing any chance of a rate cut further back into next year,” she said.

Higher interest rates have put pressure on households and businesses as the cost of mortgages and loans goes up. They are also having a knock-on effect on the wider economy, which has been slowing down.

Economists expect the new Ofgem energy price cap which kicked in on 1 October to cut inflation by at least one percentage point next month. The cap limits what suppliers can charge households per unit of gas and electricity.

However, the UK’s inflation rate is affected by multiple factors, including food and fuel prices, so is difficult to predict.