‘Farmers were right’ on food pricing – Bank of England governor

The governor of the Bank of England, Andrew Bailey, has said that there is “lots to learn from farmers”, when speaking of warnings relating to ongoing food price rises.

Speaking at the National Farmers’ Union (NFU) annual Henry Plumb Memorial lecture, held in honour of the late NFU president, Bailey said that it is “too early to declare victory” on the issue of inflation.

The governor added that while recent news on the decrease in inflation is “welcome”, it is still “far too early to be thinking about rate cuts”.

Last week the Office for National Statistics (ONS) confirmed that inflation had fallen to 4.6% during October.

The figure remains “too high”, adding that it would need to come down to the 2% target, the governor suggested.

“Monetary policy is currently restrictive in the sense that, if we maintain this stance for long enough, we will squeeze inflation out of the system.”

According to the Monetary Policy Committee’s (MPC) latest projections, “monetary policy is likely to need to be restrictive for quite some time yet”, said Bailey.

Inflation

Despite the decrease in food-price inflation, prices remain high; with consumer food prices close to 30% higher than what they were in March 2020.

Bailey said: “The high cost of food continues be a major challenge for many people across the country, especially those on lower incomes.

“The rise in consumer food prices has been a global phenomenon, caused not least by Russia’s illegal war on Ukraine.

“But UK food price inflation rose higher and faster, and has taken longer to come down, than past relationships with agricultural commodity prices would have suggested.

“We must watch for further signs of inflation persistence that may require interest rates to rise again,” he said.

Farmer acknowledgement

Bailey advocates for the voices of farmers being heard, and plans on “resuming visits around farms and food producers – because we still have a lot to learn from you”.

One of the “great joys and privileges” of his job is to “meet a lot of businesses and go to a lot of farms”.

“It was clear from these conversations that many people in the industry expected consumer food price inflation to come back down when agricultural commodity prices started to fall again towards the end of 2022.

“Supermarkets tended to tell us that food price inflation had now peaked. The truth of the matter is – farmers were more sceptical,” said Bailey.

Farmers raised their concerns regarding increased costs of production, and that these costs would have to be covered in order to sustain production.

“I have reached the judgement that farmers were right,” the governor said.

Although food-price inflation has seen a decrease, it remains an issue for both consumers and farmers.

Minette Batters, president of the NFU, said: “It is for all political parties now to decide whether they want to back British farmers, and embrace our domestic food security with policies that value food production.”