Food prices may not fall at all, the chief economist at the Bank of England has said.
“Unfortunately the days of seeing food prices fall, that does seem to be something that we may not be seeing for a little while yet, if in the future at all”, Huw Pill, the Bank of England’s chief economist, said.
Speaking at a Q&A on the cost of living, Mr Pill said even if the rate of food inflation slows, food will still be more expensive than it had been, with the effects of food inflation “going to take longer to dissipate”.
Official figures show food inflation stood at 17.3% in the 12 months up to June, when the overall consumer price index measure of inflation was 7.9%.
The UK has been particularly impacted by rising food prices. Mr Pill said “that impact on food prices in the UK has been a little bit more long-lasting than would have been expected on the back of past behaviour”.
He placed the blame at Russia’s invasion of Ukraine which scrambled the supply chain of staples grown in Ukraine such as wheat and sunflower oil, and brought up costs of raw materials and basic food.
One explanation for why the UK has been hard hit by this is UK companies responded to the price uncertainty, in the wake of the invasion, by locking in expensive contracts, Mr Pill 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,” he said.
Prices rises will begin to slow as those contracts come to an end and food sub processors in the UK adjust to the end of supply disruption, he added.