Grocery giants Tesco and Asda have fired the first shots in what is likely to be an all-out price war as credit crunched consumers cut back on shopping.

Asda has this morning slashed the prices of 10 essential products including bread, eggs and butter to 50p. From Monday, Tesco will axe prices of 3,000 items by up to 50 per cent.

The swathe of price reductions follows this week’s TNS grocery market share data, which showed rapid growth at hard discount chains such as Aldi and Lidl. In the past four weeks, Aldi’s sales have risen 20 per cent – the fastest rate in the sector.

Price has shot to the top of the retail agenda as consumers, hit by soaring fuel bills and other living expenses, rein back spending.

Although retailers have limited the extent to which rising costs are passed on to shoppers, the pace of food price inflation has also hit consumers in the pocket.

Data released this week by market researcher Nielsen showed that once inflation is tripped out, the grocery sector’s sales are “grinding to a halt”.

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