With higher food prices becoming ingrained, elevated wage inflation means the fight against inflation is not yet won, says Andrew Bailey.
There was no real change in the messaging from Governor Bailey at his latest address at the NFU Henry Plumb Memorial lecture last evening. Addressing the pressing topic of food price inflation, he took the audience on a long historic ramble of agricultural price inflation through the ages, going back to the year 1209, and demonstrated its unsurprising tight linkage to overall consumer inflation levels. Noting that while food price inflation appears to be slowing down from the very high levels earlier this year - which he obviously welcomed - these high food prices are becoming structurally inbuilt into consumer expenditure now. Food is still, according to their estimates, 30% more expensive now than it was at the start of the pandemic.
Citing that the UK labour market is operating less efficiently than before amid significant wage inflation pressures led him to conclude in a Groundhog Day moment that the Bank of England is not yet declaring victory in their battle with inflation. To re-emphasise the point, in case those bond vigilantes are not yet getting it, he stated that it is far too early to be thinking about rate cuts. All in all, there was really nothing new here.
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