Food prices for consumers, investors and central bankers
Both consumers, investors and central banks are concerned about possible inflation and supply chain issues approaching.
The Bank of England on Thursday predicted prices to exceed 4% in the coming months, suggesting it was worried about the outlook for additional inflation.
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A particular area of concern for all parties is the cost of food.
“Therefore, we need to be careful with the UN’s FAO Food Price Index,” says Russ Mold, director of investment at AJ Bell.
Benchmarks covering major agricultural ingredients such as grains, vegetable oils, meat, dairy products and sugar have increased by 33% year-on-year. It’s the fastest rate since 2011.
Source: UN Food and Agriculture Organization (FAO)
As for investors’ minds, it’s whether food prices are responsible for sustained inflation and whether this affects consumer spending levels.
“Central bankers are looking in case in which inflation needs to protect their hands and tighten monetary policy in the form of quantitative easing and tapering higher interest rates,” Mold says.
“Central bankers will be keen to point out some of the factors involved in the surge in food prices in order to defend their view that the current surge in inflation is “temporary.” These include global transport and port bottlenecks, to truck driver shortages up to bad weather in countries such as Brazil, to bad weather in Brazil, which has had a major impact on the supply of orange and coffee to global markets. ”
In many cases, the best solution for a high price is the higher price. It can suffocate demand or promote additional supply. “The latter can occur in time if the weather helps, but it’s not easy for people to stop eating because daily fever intake is required,” Mold says.
