Food Prices May Never Fall Back Down From Current High Levels, Bank Of England Economist Warns
8 Aug 2023
The price of food may never fall back down from the current prices we see according to a Bank of England economist.
The chief economist of the BoE, Huw Pill, warned that a return to cheaper food prices is “something we may not be seeing for a while yet, if in the future at all.”
According to Pill the increased the cost of raw materials and basic foods such as wheat and sunflower oil due to invasion of Ukraine is to blame.
Food inflation hit a 45-year high at 19.2% in March, easing slightly to 17.4% in June according to the Office for National Statistics (ONS).
As far why the UK is feeling the impact of rising food prices more than most countries, one reason is that firms responded to price uncertainty by locking in expensive contracts.
Speaking at a Q&A, 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.”
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.