London Daily

Focus on the big picture.
Friday, Jun 20, 2025

Food prices will remain stubbornly high for a while but there is good news on inflation ahead

Food prices will remain stubbornly high for a while but there is good news on inflation ahead

Why a sharp drop in inflation lies ahead and the highest rate of food price inflation for 45 years will take longer to ease back down.

The government has made it its primary aim to halve inflation by the end of the year but things aren't quite going to plan.

Britain has shot up the leader board and now has western Europe's highest rate of consumer price inflation.

Economists were expecting the headline rate to fall from 10.4% to 9.8% in March but it only came down to 10.1%.

This may not seem hugely significant, but it has massively raised the prospect that the Bank of England will have to raise Bank rate again to help bring inflation down to target.

That doesn't come without pain. Higher interest rates increase the cost of borrowing, which inflicts a burden on those paying off their mortgages.

For renters, it raises the risk that landlords will pass on higher mortgage costs in the form of higher rents.

By raising interest rates the Bank is trying to dampen demand in the economy, which it hopes will help bring prices back down.

It is focusing on something called "core inflation".

This strips out volatile components like food and energy, which can swing wildly from month to month, and gives economists a better view of domestically generated inflationary pressure.

This remained stubbornly high at 6.2% in March. Economists thought it would come down.

Just last week it was still unclear whether the Bank would raise the interest rate from its current level of 4.25%.

However, the odds were raised on Tuesday, when official figures showed that wages were still rising robustly.

This is something policymakers pay close attention to because higher wages may force businesses to put up prices to cover their costs.

Wednesday's inflation figures have ratcheted up the odds once more. Financial markets believe there is now a 97% chance that the Bank will raise rates by a quarter of one percentage point to 4.5% in May. That is up from 82% yesterday.

Samuel Tombs, economist at Pantheon Macroeconomics, said: "The fall in CPI inflation in March likely is too modest for the MPC (monetary policy committee) to hold back from raising Bank rate one final time next month."

However, Inflation should start to fall more substantially now.


The headline rate should drop to 8% in April as energy prices continue to fall.

Wholesale gas prices have been falling consistently and are now lower than they were in February last year, before the war in Ukraine started.

According to the Institute for Fiscal Studies, this suggests that the average households' annual energy bill will drop to about £2,000 in July, from £2,500 at present, reducing energy's contribution to the headline rate to zero.

After hitting a new record of 19.1% in March, food price inflation should also start to slow.

Shipping, transport and packaging costs have been falling, which has filtered into slowing food producer output prices.

This means the rate of price growth for goods leaving warehouses and factories has been slowing. While price growth may slow, it will take longer for prices to come down from their current level.

James Smith, research director at the Resolution Foundation, said: "Headline inflation should fall sharply next month as the effect of last April's energy price spike falls out of the data.

"But the acceleration of food price inflation to nearly 20% is a major cause for concern, particularly for low-income families who spend a far greater share of their income on food than richer households."

Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×