Supermarkets insist 'food prices have peaked' after 'stubbornly high' grocery costs blamed for interest rate rise
12 May 2023, 00:01
Supermarkets have told the government that food prices have peaked in the UK and that shoppers should start to see a fall in price in the coming months.
Ministers were met by leading supermarkets in the UK after the Bank of England Governor Andrew Bailey blamed stubbornly high food prices for driving inflation, impacting its decision to raise interest rates once again.
It comes after the Bank of England increased its interest rate to 4.5 per cent on Thursday, taking the rate to its highest level since 2008.
"Supermarkets in Britain are highly competitive but the wholesale price of goods has increased significantly due to energy and labour costs," a government source told The Times.
It was the 12th time in a row that the bank took the decision to raise interest rates, which was "terrible" for people on variable mortgages, and "mortgage prisoners" - those unable to move their mortgage providers, according to Martin Lewis.
Money saving expert Martin Lewis told Andrew Marr: "For those coming off fixes, if you can get a cheaper deal, this has very little impact, because future rises are already factored in.
"And if you look at the mortgages, interestingly, five-year fixes are cheaper than two year fixes. What's called an inverse yield curve."
Martin lewis tells Andrew Marr rise in interest rates is 'devastating' news
It comes after it was revealed that the price of British food staples, including cheddar cheese, white bread and porridge oats, have soared compared with one year ago.
The price of cheddar cheese has seen the largest increase, rising by an average of 28.3 per cent across Aldi, Asda, Lidl, Morrisons, Ocado, Sainsbury's, Tesco and Waitrose.
In one case, Dragon Welsh Mature Cheddar (180g) at Asda increased by 80 per cent in the three months to the end of March last year (£1 to £1.80).
Overall, food inflation has continued to increase, rising to 17.2 per cent in March - up from 16.5 per cent in February, according to Which?
Read More: Interest rates rise to 4.5%, the highest level since global financial crisis 15 years ago
Asked if rates have peaked, Paul Johnson, director of the Institute for Fiscal Studies, told Andrew that financial markets are expecting further increases.
He added: "And the extent to which inflation really does seem to become embedded may lead the bank to do more.
"So, I'm not saying we will get more increases, but I think relative to expectations a few months ago, which thought we would be peaking at 4.25% or 4.5% where we are now, there's more chance, actually, than there was a couple of months ago that there, I'm afraid, might still be further to go."
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Meanwhile, speaking after the rise, Chancellor Jeremy Hunt said the Bank of England had predicted that the government was on course to meet its target of halving inflation this year, but said it was not "automatic".
Asked whether he was confident of meeting Mr Sunak's inflation target, Mr Hunt said: "The Bank of England is predicting that we will hit the inflation target.
"But there has never been anything automatic about hitting it.
"That is why it is so important, if we're going to bring certainty back to family finance, stop prices rising, that we stick to our plan to halve it."
