Bailey: Must Be Alert To Second-Round Effects Of Higher Food And Energy Prices

BoE Governor Bailey gives a lecture discussing UK food price inflation noting a need to be alert to second round effects from higher food and energy prices whilst it being far too early to be thinking about rate cuts. – full remarks found here.

• “Food inflation can be volatile in the best of days. And climate change is affecting whether patterns, increasing the risk of poor harvests. New, hardier crops may become an important source of nutrients globally, but the development of such variants may be years away. And global economic fragmentation can increase the risk of spikes in prices when supply fails and countries prioritise local markets.”
• “The tragic events in the Middle East have added upside risks to energy prices and through that to the cost of food production.”
• “We must be alert to any second-round effects of higher food and energy prices to the more persistent components of consumer price inflation, those that are more closely linked to domestic cost pressures.”
• “The labour market, despite softening recently, remains tight and wage inflation remains elevated.”
• “Let me be very clear: it is far too early to be thinking about rate cuts”