Britain's Ocado follows rivals in cutting some prices

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Ocado cuts prices of over 100 essential items

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Move follows cuts by rivals including Tesco, Sainsbury's

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Hopes rising that UK food inflation will moderate

By James Davey

LONDON, June 29 (Reuters) - British online supermarket Ocado Retail has followed rivals by cutting prices of some essential items, adding to hopes a surge in food inflation will moderate this year and provide relief to consumers battered by a cost of living crisis.

Stubbornly high inflation has become a major political issue in Britain as it outstrips pay growth for almost all workers, while higher taxes and rising interest rates are also straining household budgets.

UK food and drink inflation was 18.3% in May, according to the most recent official data, and 14.6% in June, according to industry data.

Signs it could abate or even reverse in the coming months are being closely watched by the Bank of England, lawmakers and consumers.

Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, said on Thursday it had reduced prices on over 100 products, including milk, Greek yoghurt and seeded rolls, by an average of 10%.

It has cut the price of four pints of Ocado own-brand milk by 10 pence to 1.45 pounds ($1.84).

All of Britain's major grocers, including market leader Tesco and No. 2 Sainsbury's, have cut prices of some staple products in recent weeks.

Tesco said last month it believed food inflation had peaked.

The supermarkets have been accused by some trade unions and politicians of profiteering by being too slow in passing on to consumers falls in global commodity prices - a charge they reject.

Governments across Europe are struggling with high inflation. Last month, the French government secured a pledge from 75 top food companies to cut prices on hundreds of products, while Hungary's government has imposed mandatory price cuts.

While the UK government has raised concerns about the surge in food prices, it says it is not considering price caps.

Britain's competition watchdog is examining grocery prices but has said that so far it has not seen evidence pointing to specific concerns.

Shares in Ocado Group surged as much as 47% last Thursday after a Times newspaper report of possible takeover interest from Amazon. The stock has fallen sharply since.

($1 = 0.7870 pounds) (Reporting by James Davey Editing by Mark Potter)