Chocolate prices soared 17.7% in May contributing to surging food costs keeping UK inflation above the Bank of England's 2% target.

Cocoa prices have spiked due to poor harvests in Ghana and Ivory Coast exacerbated by crop disease and sector mismanagement. This supply-side shock has fed directly into higher chocolate prices, rising at a record 17.7% year-on-year. In the UK, firms also appear to be passing increased input costs, including higher National Insurance contributions and minimum wage rises, on to consumers, contributing to broader food price inflation. This cost-push inflation, combined with external shocks and constrained supply, has kept headline inflation at 3.4%, complicating interest rate decisions for the Bank of England.

UK inflation: Chocolate price rises hit record as food costs grow - BBC News

1. Using a demand and supply diagram, explain why chocolate prices have risen by 17.7% in the past year.

2. Discuss the factors contributing to cost-push inflation pressure in the UK.

3. Evaluate whether the Bank of England was right to hold the Bank base rate at 4.25% in June.