London Daily

Focus on the big picture.
Friday, Dec 05, 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
UK Inquiry Finds Putin ‘Morally Responsible’ for 2018 Novichok Death — London Imposes Broad Sanctions on GRU
India backs down on plan to mandate government “Sanchar Saathi” app on all smartphones
King Charles Welcomes German President Steinmeier to UK in First State Visit by Berlin in 27 Years
UK Plans Major Cutback to Jury Trials as Crown Court Backlog Nears 80,000
UK Government to Significantly Limit Jury Trials in England and Wales
U.S. and U.K. Seal Drug-Pricing Deal: Britain Agrees to Pay More, U.S. Lifts Tariffs
UK Postpones Decision Yet Again on China’s Proposed Mega-Embassy in London
Head of UK Budget Watchdog Resigns After Premature Leak of Reeves’ Budget Report
Car-sharing giant Zipcar to exit UK market by end of 2025
Reports of Widespread Drone Deployment Raise Privacy and Security Questions in the UK
UK Signals Security Concerns Over China While Pursuing Stronger Trade Links
Google warns of AI “irrationality” just as Gemini 3 launch rattles markets
Top Consultancies Freeze Starting Salaries as AI Threatens ‘Pyramid’ Model
Macron Says Washington Pressuring EU to Delay Enforcement of Digital-Regulation Probes Against Meta, TikTok and X
UK’s DragonFire Laser Downs High-Speed Drones as £316m Deal Speeds Naval Deployment
UK Chancellor Rejects Claims She Misled Public on Fiscal Outlook Ahead of Budget
Starmer Defends Autumn Budget as Finance Chief Faces Accusations of Misleading Public Finances
EU Firms Struggle with 3,000-Hour Paperwork Load — While Automakers Fear De Facto 2030 Petrol Car Ban
White House launches ‘Hall of Shame’ site to publicly condemn media outlets for alleged bias
UK Budget’s New EV Mileage Tax Undercuts Case for Plug-In Hybrids
UK Government Launches National Inquiry into ‘Grooming Gangs’ After US Warning and Rising Public Outcry
Taylor Swift Extends U.K. Chart Reign as ‘The Fate of Ophelia’ Hits Six Weeks at No. 1
250 Still Missing in the Massive Fire, 94 Killed. One Day After the Disaster: Survivor Rescued on the 16th Floor
Trump: National Guard Soldier Who Was Shot in Washington Has Died; Second Soldier Fighting for His Life
UK Chancellor Reeves Defends Tax Rises as Essential to Reduce Child Poverty and Stabilise Public Finances
No Evidence Found for Claim That UK Schools Are Shifting to Teaching American English
European Powers Urge Israel to Halt West Bank Settler Violence Amid Surge in Attacks
"I Would Have Given Her a Kidney": She Lent Bezos’s Ex-Wife $1,000 — and Received Millions in Return
European States Approve First-ever Military-Grade Surveillance Network via ESA
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
Domino’s UK CEO Andrew Rennie Steps Down Amid Strategic Reset
UK Economy Stalls as Reeves Faces First Budget Test
UK Economy’s Weak Start Adds Pressure on Prime Minister Starmer
UK Government Acknowledges Billionaire Exodus Amid Tax Rise Concerns
UK Budget 2025: Markets Brace as Chancellor Faces Fiscal Tightrope
UK Unveils Strategic Plan to Secure Critical Mineral Supply Chains
UK Taskforce Calls for Radical Reset of Nuclear Regulation to Cut Costs and Accelerate Build
×