Food prices set to stay high says Bank of England’s chief economist
Food prices are predicted to remain high and may not return to the levels seen before the cost-of-living crisis, a leading economist has said.
Following the Ukraine invasion and soaring prices and inflation in the UK, food prices have been steadily rising.
Food price inflation is now falling, and hit 13.4% in July, a monthly fall from 14.6%, the lowest level since December 2022, yet prices are still significantly more than they were a year ago. Households who have not made any changes to the way they shop are now paying around £800 more for their food shopping.
Huw Pill, the Bank of England’s chief economist, said he expects food price inflation to fall to around 10% by the end of the year.
But he said in an open question and answer meeting that cheaper food prices were “something we may not be seeing for a while yet, if in the future at all”.
Pill said food price inflation was “more lasting than expected” and not at a “very comfortable level”, according to a report by the BBC.
Firms locking in higher prices
He also said some supermarkets had locked in higher prices in advance of the war in Ukraine, leading to shoppers paying more.
He said: “Some firms decided to sort of lock in their purchases of commodities in international markets in order to reduce that uncertainty, but potentially locked in at quite high levels of prices and they’re still passing that through the system into what ultimately we’re paying for in shops.”
Over the past year, many supermarkets have launched loyalty schemes, offering cheaper prices to members, and have cut prices to ease the pressure of the cost-of-living crisis for shoppers, and to attract more custom.
Pill said that while there were some hiccups with bringing food prices down, such as the war in Ukraine, but added that global prices for some commodities had begun to fall.
It comes as the Bank of England has raised the base rate to 5.25% piling more pressure on borrowers. Experts are also predicting that it will rise again this year and will not start to fall until 2024.