Tesco has turned up the pressure on the Bank of England to cut interest rates tomorrow in an effort to revive consumer confidence in the run-up to Christmas and the new year.

Dismissing mounting fears about food price inflation as “hype”, Britain’s biggest supermarket said yesterday that it was time for the Bank to send worried shoppers a signal by bringing down the cost of borrowing.

Andrew Higginson, Tesco’s group finance director, said: “The problem is not inflation but consumer sentiment. It’s important that [the Bank of England] starts to show interest rates are going to come down.”

His comments came only a day after the British Retail Consortium had said that like-for-like sales growth across the high street was 1.2 per cent in November, well below the average for the past two years.

Worries about food-price inflation have been stoked by sharp increases in the cost of staple commodities, such as wheat and milk. Fruit and vegetable prices are thought to have soared by 23 per cent to a three-year high.

However, Mr Higginson said that inflation excluding petrol in Tesco stores was running at only 0.8 per cent. “Certain prices will rise, but if you look at it in the round this is a very competitive market,” he said.

Tesco’s latest trading update showed that the weaker economic climate was having little effect on its core grocery business. It reported like-for-like sales growth of 4.1 per cent in the UK for the three months to November 24, compared with 2.4 per cent in the previous quarter.

Mr Higginson said that customers had become more cautious. Like-for-like growth in nonfood had softened slightly, but he insisted that consumers were still “prepared to spend”.

Tesco’s international sales rose by 25.7 per cent in the quarter to November 24. The group said that its first Fresh & Easy stores in the United States had been “very well received” by customers.

Sir Terry Leahy, Tesco’s chief executive, is visiting the American operation again this week as part of a series of meetings with US investors. He told analysts yesterday that Tesco had taken market share in the grocery sector from every UK competitor “bar Waitrose” in the past three months.

“We have taken a little bit from Sainsbury’s,” he said. “They were taking a bit from us, but that trend has been reversed.”

Shares in the group, which have out-performed the FTSE All-Share Index by 15 per cent since September, eased slightly to 484p, down 3.75p.

Andrew Kasoulis, an analyst at Credit Suisse, said that the performance of Tesco was in line with expectations. “We continue to view Tesco as the best long-term investment in the European food retail sector,” Mr Kasoulis said.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive