Food price inflation has surged to a record 9.5 per cent in the year to July as supermarkets pass on higher energy and transport costs to their customers.

The British Retail Consortium (BRC) today said that shop prices rose by 3.2 per cent across the high street in July — the highest rate since it started the index two years ago and up from 2.5 per cent in June.

Food prices were 9.5 per cent higher compared with July last year, against 7 per cent in June.

Experts said the figures would put more pressure on the Bank of England to control inflation. The Bank's Monetary Policy Committee, which begins its two-day rate setting meeting today, is widely expected to keep borrowing costs on hold at 5 per cent.

Howard Archer, chief UK and European economist at Global Insight, said a rate cut may not be possible until 2009 because of the fear that a reduction would fuel yet more inflationary pressure in the economy.

He said: “The Bank of England remains tightly trapped between the rock of rising inflation and the hard place of markedly slowing economic activity.

“Going forward, we expect muted consumer spending to increasingly dilute retailers’ pricing power and ultimately facilitate interest rate cuts.”

The BRC insisted that retailers' costs were rising faster than prices charged in the stores.

Non-food prices were 0.1 per cent higher in July with the cost of furniture and floor coverings up 2.5 per cent on a year ago.

Stephen Robertson, director general of the BRC, said: “Falls in the prices of oil and some world food commodities, such as wheat and soya, provide hope but most retail costs remain sharply up on a year ago and are still rising.”

The figures come a day after PricewaterhouseCoopers claimed that consumers were expected to cut spending on groceries, electronics and eating out over the coming year to cope with the rising cost of living.

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