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Shop prices in the UK were 0.4 per cent higher in August than they were in the same month a year ago, according to new research released today.

However the British Retail Consortium (BRC), which released the figures, stressed that its data proved the amount of inflationary pressure coming from the sector was continuing to fall.

According to the trade association's latest shop price index, the annual rate of retail price inflation recorded in August was less than both the 0.6 per cent year-on-year rise recorded in July and the 0.5 per cent increase reported for June.

Shop prices also remained flat on a monthly basis, with the BRC stressing that the level of inflationary pressure coming from the high street was still "significantly less" than the official consumer price index (CPI). The government's preferred measure of inflation currently stands at 1.9 per cent after a surprise drop recorded in July.

The BRC said that food inflation, which remains responsible for driving shop prices, continued to fall back in August.

Last month the rate at which food prices increased dropped for a fourth consecutive month, falling to 2.1 per cent. That compared to a fall of 2.8 per cent recorded in July.

Non-food prices have also declined year-on-year in every month of 2007 so far, said the BRC. In August non-food prices were 0.4 per cent lower than there were for the same month a year ago.

Although the BRC acknowledged that the slowdown in food price inflation was likely to be reversed once the full impact of the recent flooding in the UK was felt, the organisation stressed that overall shop prices were likely to remain low due to the effect of falling non-food prices and weaker levels of consumer confidence in the wake of higher interest rates and living costs.

"Food price inflation is still slowing, and any inflationary pressures in the next few months arising from the recent flooding and poor world harvests will not be curbed by a rise in interest rates," insisted BRC director general Kevin Hawkins.

Retailers fear that a further rise in interest rates could lead to decreased levels of consumer spending, with separate research published today by Nationwide showing that consumer confidence fell to a four-month low in August in the wake of higher borrowing costs.

However despite the Bank of England having raised the benchmark rate of interest five times over the past year in a bid to stem inflation, analysts are widely predicting that monetary policymakers will opt to keep the key rate on hold at 5.75 per cent when they meet tomorrow.