The potential for further food price rises is a “major worry” for the UK and the developing world, the governor of the Bank of England, the UK’s central bank, has warned.
Appearing before the Treasury Select Committee of the House of Commons on May 16, Andrew Bailey said that the Russian invasion of Ukraine has resulted in an unpredictable jump in inflation, as it has had a major impact on global food prices.
“The Ukrainian finance minister said that there is food in store but they can’t get it out,” Bailey told MPs.
“While he was optimistic about crop planting, as a major supplier of wheat and cooking oil, he said we have no way of shipping it out and that is getting worse.”
He added: “It is a major worry for this country and a major worry for the developing world. Sorry for being apocalyptic but that is a major concern.”
Another risk that has been brought about by the war is “a further energy price shock, which would come from the cutting off of gas and distillates, such as products like diesel,” the governor said.
The UK’s inflation rate was at 7 percent in March, according to the Office for National Statistics (ONS). The Bank of England has said inflation is likely to peak at 10.25 percent during the final quarter of 2022.
“The main driver of inflation and what brings it down is the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices,” Bailey told MPs.
“That will have an impact on domestic demand and it will dampen activity, and I’m afraid it looks like it will increase unemployment,” he added.
He told the committee that “we are walking a very narrow path” between surging inflation and risks to growth.
The Bank has faced criticism that it did not move quickly enough to curb the soaring inflation, but Bailey told MPs he does not believe the central bank could have acted differently.
He said: “There have been a series of supply shocks and most recently with the impact of the war,” which he said no one could have predicted.
The supply shocks also came from China, he said, as “a further leg” of COVID-19 “appears to be affecting the country more seriously.”
The Chinese Communist Party (CCP) regime has continued to stick to its “zero-COVID” strategy and has imposed draconian lockdowns on major cities including Shanghai, the country’s most important economic engine, causing severe disruptions to international supply chains.
