The UK's biggest retailer said it expected the outlook for food inflation to continue to ease in the run-up to Christmas despite upward pressures remaining on shopping bills.

Experts have warned that higher oil prices and a weakening of the pound against the dollar, which makes imports more expensive, are a threat to consumer costs in the months ahead.

But Tesco said it was in a "strong position" to invest further in its prices despite hikes for meats and potatoes.

It said it had taken market share from its largest rivals in the industry price war as it reported a 13.5% leap in adjusted operating profits for the first half of its financial year to £1.4bn.

As a result, the company said it was now expecting annual profits of between £2.6bn and £2.7bn by the same measure.

That was up from earlier guidance of about £2.5bn.

Like-for-like sales at its supermarkets were up 7.8% over the six months compared to the same period last year.

That figure rose to 8.7% solely for the UK.

'Relentless focus on customers'

It added that sales volumes were higher than anticipated, with its Finest range seeing growth of 4.1% despite the squeeze on shoppers' budgets amid the wider cost of living crisis.

Chief executive Ken Murphy said: "We know how challenging it is for many households across the country, as they continue to grapple with ongoing cost of living pressures.

"We are committed to doing everything we can to drive down food bills and Tesco is now consistently the cheapest full-line grocer.

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"This relentless focus on customers, combined with significant cost reductions from our 'save to invest' programme, has driven our strong performance in the first half of the year.

"Food inflation fell across the half and while external pressures remain, we expect that it will continue to do so in the second half of the year.

"We are in a strong position to keep investing for customers, and will continue to lower prices wherever we can - doing everything in our power to make sure customers can have a fantastic, affordable Christmas by shopping at Tesco."

He told a call with analysts that shoppers were in good shape heading towards the crucial festive season, largely because the UK has high employment.

Shares rose by 2.5% in early deals.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said of the performance: "It seems Tesco's performing its own supermarket sweep, knocking competition out the way in the process and loading up on market share.

"As a full-line retailer it maintains an edge over the likes of Lidl and Aldi where you can't quite find some more obscure ingredients.

"The enormous investment Tesco's put in to being more affordable has also helped retain and attract customers while inflation's been running so hot."

She added: "The real test will be Christmas, where consumers will want to put on as much of a feast as possible, but where wallets may not allow it.

"We could be faced with a race to the bottom on festive pricing, which could spell trouble for margins."