The latest figures from the Office of National Statistics show that food inflation in the UK is down, although cereal prices are increasing and show volatility and other areas showed overall rises.

The CPI (consumer price index) annual inflation rate, the government’s measure of inflation, was up by 0.2 per cent at 4.4 per cent last month. Upward pressure came principally from rising fees for financial services; mortgages in particular, clothing, footwear, furniture, housing rent and household equipment. Clothing and footwear saw the largest increase since records began in 1997.

The Office of National Statistics said the only significant downward pressure to inflation between June and July came from some foods and non-alcoholic beverages. Overall, prices for these goods rose by 0.3 per cent for the period, compared to a 1.0 per cent rise in 2010. Fish, fruit, mineral waters, soft drinks and juices all had noteworthy downward affects according to the Office of National Statistics’ figures.

However, it also revealed that most benefits were offset by the upward effect from bread and cereals, which increased by 1.5 per cent over the month compared to a 0.4 per cent rise this time last year.

Mervyn King, the governor of the Bank of England, has written a letter to the chancellor to offer an explanation as to why CPI inflation remains well above the 2% target rate. The governor must write a letter for every three months that CPI is more than one percentage point above or below the target.

Market research group Kantar Worldpanel found that while grocery price inflation had grown 5.2 per cent in the 12 weeks measured, compared 2010, grocery sales had only risen by 3.8per cent. Edward Garner of Kantar Worldpanel told the BBC, "It is evident that shoppers are trying to manage their 'personal' inflation by trading down. It's therefore unsurprising that the discounters have pushed further ahead this month."