Food prices rose by 7 per cent during June, the fastest pace of annual growth in 18 months, while concerns rose that retailers are passing on the rising cost of goods to customers.

Figures from the British Retail Consortium (BRC) revealed that food is 1 per cent more expensive than in May. At the same time, prices of non-food items also rose for the first time since December 2006.

The cost of 1kg bag of basmati rice has risen by 93 per cent over the past year to £1.74, according to mysupermarket.com, the supermarket price comparison site, while the cost of a 500g bag of fusilli pasta has risen by more than 110 per cent.

A loaf of bread is now 20 per cent more costly, while butter has risen by 62 per cent.

The BRC said that the price of goods such as clothing, footwear and electricals rose by 0.2 per cent year on year in May after falling by 0.4 per cent in April, raising concerns that retailers are starting to pass on increased costs to customers.

Prices of all shop goods rose by an average of 2.5 per cent compared with May last year, up from 1.8 per cent in April.

The BRC points out that this is still lower than the rate of inflation, currently at 3.3 per cent, but experts say that rising prices will make worrying reading for the Bank of England's Monetary Policy Committee as it starts its two-day rate-setting meeting today.

Howard Archer, chief UK and European economist at Global Insight, said the signs of rising prices are likely to strengthen the case for keeping rates on hold, despite the wider economic gloom.

He said: "The latest data highlight that the Bank of England remains trapped between the rock of rising inflation and the hard place of markedly slowing economic activity.

"Given current inflation levels and risks, the Bank of England may well be reluctant to cut interest rates until 2009 unless the economy really falls off a cliff."

Stephen Robertson, director general of the BRC, said that the increases in food prices were modest compared with soaring agricultural prices.

"Although their own costs are going up, food retailers are running high-profile price cuts and promotions. They are keeping prices to customers down by cutting costs and increasing sales."

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