BoE's Huw Pill: Food prices may never return to pre-inflation levels

investmentweek.co.uk:

Bank of England chief economist Huw Pill | Credit: Bank of England

During a live Q&A session on Monday (7 August), Pill argued «the days of seeing food prices fall... does seem to be something we may not be seeing for a little while yet, if in the future at all».

He explained staples such as eggs and milk may see price cuts, but there was no sign of a «transformation» in higher prices.

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Food price inflation is likely to remain in double digits, at around 10%, at the end of the year before falling further in 2024, he said, remaining much higher than overall inflation.

«That is still not a very comfortable level, certainly for us when we are looking at trying to reduce the overall level of inflation down to our 2% target,» he said.

«Having food price inflation running at 10% is clearly not really compatible with that on a lasting basis.»

Slowing food price inflation when it does come will not automatically lower supermarket prices to previous levels, he added.

In its latest monetary policy report, published last week, the Bank of England set out the findings of recent meetings it held with food producers, processors and retailers, who said they still faced higher inflation on input costs than usual. 

Some food retailers had entered long-term contracts to secure supplies when global commodity prices were at a peak, but the higher costs also reflected continuing energy and wage pressures.

Last week, the UK central bank raised interest rates to a fresh 15-year high of 5.25%, in its ongoing attempts to curb inflation.

Pill described monetary policy as a «powerful» but «blunt» tool to fight price rises.

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