The Governor of the Bank of England has raised concerns about rising food prices by telling a Parliamentary Committee that “apocalyptic” global food shortages and price rises may be on the way.
Andrew Bailey also warned that the Bank felt “helpless” in regard to controlling inflation as the cost of living crisis grows.
Mr Bailey told British MPs on the Treasury Select Committee that he has “run out of horsemen” when counting the shocks facing the UK, saying that energy and food costs rises are being driven by global market forces beyond his control.
Inflation is expected to create a “very big income shock” with prices rises the worst in 30 years and a risk of double-digit inflation before the end of the year.
The Governor said he is increasingly concerned about a further surge in food costs if Ukraine is unable to ship wheat and cooking oils from its warehouses because of a Russian blockade. Ukraine is a key shipper of corn, sunflower oil and wheat, but the war has disrupted supply lines.
He said that he had spoken to Ukraine’s finance minister and added: “The [risk] I’m going to sound rather apocalyptic about I guess is food.
“Ukraine does have food in store but it can’t get it out at the moment. While [the finance minister] was optimistic about crop planting, he said at the moment we have no way of shipping it out as things stand, and it is getting worse.” Mr Bailey said.
“That is a major worry. It is not just a major worry for this country, it is a major worry for the developing world.
“I am by no stretch of the imagination a military strategist, but whatever can be done to help Ukraine get its food out would be a huge contribution.”
MPs have been critical of what they see as the failure of the Bank of England to act promptly in response to climbing inflation, claiming the institution acted too slowly regarding raising interest rates, and continuing with a quantitative easing – or money-printing – programme over the past decade.
Commentators warned that families may be unable to afford to eat unless solutions are found, the Telegraph warned <https://www.telegraph.co.uk/business/2022/05/16/bank-england-warns-apocalyptic-global-food-shortage/> .
Asked by MPs on the Committee if he felt “helpless” to control inflation, Mr Bailey said: “Yes.”
He said: “It is a very very, more than uncomfortable – I am trying to think of a word that is even more severe than that – it is a very very difficult place to be.
“To forecast 10pc inflation and to say there is not a lot we can do about 80pc of it, I can tell you it is an extremely difficult place to be. We have to recognise the reality of the situation we face.”
Previously, central banks have raised interest rates to reduce borrowing and slow the domestic economy, but the Bank of England says that most of the current price rises are being driven by global markets.
Mr Bailey said the crisis “is the biggest test of the monetary policy framework that we have had in its 25 years.”
He added that he would be prepared to raise rates to control inflation even if that led to a recession, saying: “We have to get [inflation] back to target. And that is clear.”