UK interest rates: Prices to be higher for longer, Bank of England warns
Soaring food costs mean prices will remain higher for longer, the Bank of England warned, as it raised interest rates for the 12th time.
Interest rates were hiked to 4.5% from 4.25% – the highest in almost 15 years – in the battle to slow inflation.
“It’s taking longer for food price [falls] to come through,” Bank boss Andrew Bailey told the BBC.
But Mr. Bailey was more optimistic about how quickly the UK economy would grow, saying it would now avoid recession.
The Bank has been rapidly raising rates to try to slow the sharp rise in the cost of living.
UK inflation remains close to its highest level for 40 years and is not dropping as quickly as predicted as prices in UK supermarkets remain high.
Some have questioned why a drop in the cost of wholesale food prices globally has not led to falls in the fees charged by UK supermarkets.
However, Mr. Bailey said he did not think supermarkets and other grocers charged customers more than they should.
“It actually doesn’t look like that’s going on,” he told the BBC, adding that higher energy prices and the war in Ukraine had made it harder to import some foods and led to higher costs for retailers.
Energy is quite a big element in the cost of food production and that’s certainly had an effect in this crisis. Often producers have bought forward (supplies) at high prices because they were concerned about whether they were going to get the things they needed.
“But, as we said before, we are in very unusual times.”
He said grocers had told him that they expected food inflation to “come down quite rapidly” throughout the rest of the year.