Bank governor in ‘apocalyptic’ food price warning
Andrew Bailey, governor of the Bank of England, has warned of an “apocalyptic” threat to food supplies caused by the war in Ukraine that will impact on prices.
Addressing MPs, he said he felt “helpless” and suggested the outlook for inflation could worsen if Ukraine continues to suffer crop damage that is contributing to its inability to get food supplies to market.
Ukraine is estimated to supply 10% of the world’s wheat and is also a major producer of sunflower oil.
He told the Treasury Select Committee that UK consumer demand will be impacted by current inflation, which is the highest in 30 years, and warned that it is likely to lead to higher unemployment.
Inflation is currently running at 7% and the latest figure due out on Wednesday could see it hit 9%, peaking at 10.25% during the final quarter this year. The Bank’s target is 2% and Mr Bailey said 80% of the overshoot was caused by factors outside the Bank’s control.
“The main driver of inflation and what brings it down is the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices,” he told MPs.
“That will have an impact on domestic demand and it will dampen activity, and I’m afraid it looks like it will increase unemployment.
“The Ukrainian finance minister said is that there is food in store but they can’t get it out,” he told MPs.
“While he was optimistic about crop planting, as a major supplier of wheat and cooking oil, he said we have no way of shipping it out and that is getting worse.
“It is a major worry for this country and a major worry for the developing world. I’m sorry for being apocalyptic, but that is a major concern.”
Mr Bailey defended the Bank of England’s recent rate rises and said he not think it could have done anything differently to avoid sharp price rises.
“There have been a series of supply shocks, most recently with the impact of the war – Russia’s invasion of Ukraine. We can’t predict things like wars – that’s not in anybody’s power,” he said.