There was much to chew over in rather unpalatable UK inflation data on Wednesday showing surging food prices.

And economists flagged signs of companies in the food retailing and hospitality sectors passing on the recent hike in employers’ national insurance contributions to customers.

Overall, annual UK consumer prices index (CPI) inflation climbed to an 18-month high of 3.8% in July from 3.6% in June. The July reading was slightly higher than the 3.7% overall forecast from economists in a Reuters poll.

Naturally, economists’ thoughts turned immediately to what the latest inflation data might mean for the path of UK interest rates.

The surge in food prices was also, not surprisingly, very much in focus.

Surging food prices, and overall annual CPI inflation which is nearly twice the 2% target set for the Bank of England by the Treasury are most unwelcome news for UK households which have faced such tough times for so long.

Janet Mui, head of market analysis at RBC Brewin Dolphin, summed up the situation rather well when she talked about the latest jump in inflation putting the Bank of England in a “tougher spot” on interest rates and “reinforcing the squeeze felt by households”.

The outlook for UK interest rates has been sharply in focus this month. A vote by the Bank of England’s Monetary Policy Committee to cut benchmark UK interest rates from 4.25% to 4% at its August meeting was much closer than expected.

There had to be two votes to produce a result. In the first vote, there was a highly unusual situation in which the two most popular choices were tied amid a three-way split, with four members voting for a quarter-point cut, four for no change,........

© Herald Scotland