The chief economist of the Bank of England has warned that food prices may never fall again after Russia launched its war in Ukraine.
Speaking of the cost-of-living crisis at a Q&A, the Bank of England’s Huw Pill, said that the price of food “could still remain higher than it was” following the invasion of Ukraine, Sky News reported.
“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.”
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Pill said that Russia’s invasion of Ukraine was to blame for rising food prices as it caused challenges in the food supply chain of commodities, such as wheat and sunflower oil that were grown in Ukraine.
As a result, this increased the cost of raw materials and basic food items.
He added that one reason the UK has been hit hard is due to businesses responding to pricing uncertainty by locking in expensive contracts.
“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.”
However, Pill said that as these deals come to a close and food sub processors in the UK modify to the end of supply chain disturbance, price rises will begin to slow.
In March, the Office for National Statistics (ONS) recorded that food inflation had hit a 45-year high at 19.2%, easing slightly to 17.4% in June.
Retailers told the Bank of England this week that food inflation has “now peaked”, yet they expect food prices to increase at an annual rate of 10% by the end of the year.
