Food prices climb closer to record, increasing inflation anxiety
(Bloomberg) – Food prices have moved closer to an all time high, giving consumers and governments around the world an even bigger headache in the face of inflation.
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A United Nations indicator on world food prices rose 1.2% last month, threatening to make it more expensive for households to put a meal on the table. It’s further evidence of skyrocketing inflation in the world’s largest economies and may make it even harder for poorer countries to import food, exacerbating the hunger crisis.
Prices have jumped for multiple reasons: bad weather has hurt crops, higher shipping rates, labor shortages and energy shortages have hit supply chains, and costs fertilizers have also increased. While it typically takes some time for raw material costs to trickle down to supermarkets, the recovery brings to mind memories of peaks in 2008 and 2011 that contributed to the global food crises.
“This is obviously bad news for consumers,” said Abdolreza Abbassian, senior economist at the Food and Agriculture Organization of the United Nations.
The upward push in November was mainly driven by grains and dairy products, while prices for vegetable oils and meat fell, the FAO said in a report on Thursday.
Rising food prices are straining consumer budgets already strained by the Covid-19 crisis and high energy costs. It seems likely that buyers will feel the effects of inflation over the coming months as economies reopen in the wake of the pandemic.
This creates a political dilemma for central banks about how quickly to reduce stimulus measures. This week, Federal Reserve Chairman Jerome Powell said his next meeting should discuss whether to complete bond purchases a few months earlier, and removed the word “transitional” to describe high inflation. .
While food prices are unlikely to collapse anytime soon, tightening monetary policy and concerns about the spread of the omicron variant of the coronavirus are likely to dampen the recovery as “the market anticipates a slowdown in the economy. request, ”Abbassian said.
Nonetheless, the long-term outlook remains uncertain, as high fertilizer costs and the potential for bad weather that could harm crops could restrict food supplies, he said.
The FAO said last month that the global food import bill is expected to climb even more than expected to a record high this year due to high commodity and freight costs. Of particular concern is that import costs in poor countries are rising faster than those in developed economies, which is becoming a growing problem in regions that depend on shipping supplies.
Authorities in regions like North Africa – one of the world’s largest grain importers – and Turkey are already struggling to protect citizens from expensive food. Elsewhere, Serbia caps the price of some basic commodities, including milk and flour, to curb price increases.
(Updates with comments from economists in the fourth paragraph)
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