UK: After the Bank of England (BoE) raised its base interest rate for the 12th consecutive time on Thursday, Bloomberg reported that the bank's primary inflationary concern has shifted from energy to rising grocery prices in the UK.
Despite a slight drop in energy prices, double-digit inflation is putting a severe strain on British families' finances. Given that they spend the majority of their income on necessities and are currently experiencing a sharp increase in their shopping expenses, low- and middle-income families are being hit the hardest.
According to the BoE, food inflation has been "particularly high," reaching 19.1% in March. In the UK, grocery price growth over the past year has reached its highest point in records. According to the Bloomberg article, it has now displaced energy costs as the public's top financial concern.
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Bank of England Governor Andrew Bailey told reporters on Thursday, "We are acutely aware of how difficult this rise in food prices is for people, especially for those on lower incomes."
Though he acknowledged that it is taking "longer than we previously thought," he said he anticipates that the inflation of food prices will start to slow down soon.
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In the meantime, economists claim that in "today's modern, interconnected world," it is challenging to predict where prices will go during a period of significant supply disruptions brought on by the conflict in Ukraine. As a result, according to Bloomberg, the BoE has no prior experience forecasting food prices.
According to the recent Monetary Policy Report from the BoE, "the sustained higher price level represents a long-term cost for households and businesses, and this is one driver of subdued economic activity over the forecast horizon."
Bloomberg reports that it will take time for food producers, such as farmers, who frequently purchase essential supplies like fertilisers in advance, to adjust prices and make their products more accessible to consumers, even in the event that energy costs decline.
