The supermarket price wars failed to keep a lid on inflation this month as prices rose 1.7% on last month.

The Grocer Price Index, our inflation-tracking index of grocery staples weighted to typical consumer shops, indicated annual food price inflation was holding steady at 15.1%, defying expectations of falling prices.

It has risen despite concerted efforts from retailers to keep prices low through heavy promotional activity and pushing of budget and own-label lines.

Nevertheless, analysts insisted the price war was genuine and was beginning to impact on margins. “The first signs of real margin impact came with the Christmas trading updates,” said one.

“Morrisons and Sainsbury’s especially revealed exceptionally strong sales growth, but no revision of expected profits. That’s a clear sign of lower margins in recent weeks. We’ll have a much clearer picture from Tesco’s results in April.”

Supermarkets continue to battle cost pressure despite falling inflation. Sterling’s rally this month against the dollar and euro proved shortlived as it slipped to lower levels against both.

Last week the pound hit a 23-year low against the dollar. Several key commodities also rose in price: cocoa hit a record high, sugar rose due to speculation about new markets in India and feed wheat prices recovered.

“The strength of the euro against the pound is going to be sustained over the medium term,” said Asda chief executive Andy Bond, painting a more pessimistic picture than many industry pundits.