London Daily

Focus on the big picture.
Friday, Nov 21, 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
ASU Launches ASU London, Extending Its Innovation Brand to the UK Education Market
UK Prime Minister Keir Starmer to Visit China in January as Diplomatic Reset Accelerates
Google Launches Voluntary Buyouts for UK Staff Amid AI-Driven Company Realignment
UK braces for freezing snap as snow and ice warnings escalate
Majority of UK Novelists Fear AI Could Displace Their Work, Cambridge Study Finds
UK's Carrier Strike Group Achieves Full Operational Capability During NATO Drill in Mediterranean
Trump and Mamdani to Meet at the White House: “The Communist Asked”
Nvidia Again Beats Forecasts, Shares Jump in After-Hours Trading
Wintry Conditions Persist Along UK Coasts After Up to Seven Centimetres of Snow
UK Inflation Eases to 3.6 % in October, Opening Door for Rate Cut
UK Accelerates Munitions Factory Build-Out to Reinforce Warfighting Readiness
UK Consumer Optimism Plunges Ahead of November Budget
A Decade of Innovation Stagnation at Apple: The Cook Era Critique
Caribbean Reparations Commission Seeks ‘Mutually Beneficial’ Justice from UK
EU Insists UK Must Contribute Financially for Access to Electricity Market and Broader Ties
UK to Outlaw Live-Event Ticket Resales Above Face Value
President Donald Trump Hosts Saudi Crown Prince Mohammed bin Salman at White House to Seal Major Defence and Investment Deals
German Entertainment Icons Alice and Ellen Kessler Die Together at Age 89
UK Unveils Sweeping Asylum Reforms with 20-Year Settlement Wait and Conditional Status
UK Orders Twitter Hacker to Repay £4.1 Million Following 2020 High-Profile Breach
Popeyes UK Eyes Century Mark as Fried-Chicken Chain Accelerates Roll-out
Two-thirds of UK nurses report working while unwell amid staffing crisis
Britain to Reform Human-Rights Laws in Sweeping Asylum Policy Overhaul
Nearly Half of Job Losses Under Labour Government Affect UK Youth
UK Chancellor Reeves Eyes High-Value Home Levy in Budget to Raise Tens of Billions
UK Urges Poland to Choose Swedish Submarines in Multi-Billion € Defence Bid
US Border Czar Tom Homan Declares UK No Longer a ‘Friend’ Amid Intelligence Rift
UK Announces Reversal of Income Tax Hike Plans Ahead of Budget
Starmer Faces Mounting Turmoil as Leaked Briefings Ignite Leadership Plot Rumours
UK Commentator Sami Hamdi Returns Home After US Visa Revocation and Detention
UK Eyes Denmark-Style Asylum Rules in Major Migration Shift
UK Signals Intelligence Freeze Amid US Maritime Drug-Strike Campaign
TikTok Awards UK & Ireland 2025 Celebrates Top Creators Including Max Klymenko as Creator of the Year
UK Growth Nearly Stalls at 0.1% in Q3 as Cyberattack Halts Car Production
Apple Denied Permission to Appeal UK App Store Ruling, Faces Over £1bn Liability
UK Chooses Wylfa for First Small Modular Reactors, Drawing Sharp U.S. Objection
Starmer Faces Growing Labour Backlash as Briefing Sparks Authority Crisis
Reform UK Withdraws from BBC Documentary Amid Legal Storm Over Trump Speech Edit
UK Prime Minister Attempts to Reassert Authority Amid Internal Labour Leadership Drama
UK Upholds Firm Rules on Stablecoins to Shield Financial System
Brussels Divided as UK-EU Reset Stalls Over Budget Access
Prince Harry’s Remembrance Day Essay Expresses Strong Regret at Leaving Britain
UK Unemployment Hits 5% as Wage Growth Slows, Paving Way for Bank of England Rate Cut
Starmer Warns of Resurgent Racism in UK Politics as He Vows Child-Poverty Reforms
UK Grocery Inflation Slows to 4.7% as Supermarkets Launch Pre-Christmas Promotions
UK Government Backs the BBC amid Editing Scandal and Trump Threat of Legal Action
UK Assessment Mis-Estimated Fallout From Palestine Action Ban, Records Reveal
UK Halts Intelligence Sharing with US Amid Lethal Boat-Strike Concerns
King Charles III Leads Britain in Remembrance Sunday Tribute to War Dead
UK Retail Sales Growth Slows as Households Hold Back Ahead of Black Friday and Budget
×