Milk prices up 38% and sugar 42% amid fear of new rate rise
ood prices have sky-rocketed by a shocking 19 per cent, official figures revealed on Wednesday as warnings grew that more mortgage bill increases will further deepen the cost-of-living crisis.
Sugar was up 42 per cent, milk 38 per cent, olive oil 49 per cent, cheese 34 per cent and eggs 32 per cent in March, compared with a year earlier, fuelling the sharpest jump in food prices since August 1977.
Overall inflation stayed stuck in double figures, dashing hopes of an early end to the crisis.
The consumer prices index stood at 10.1 per cent last month — down from 10.4 per cent in February — the seventh month on the trot it has been in double digits, and defying City expectations that it would dip into single figures.
Economists swiftly warned that the Bank of England’s Monetary Policy Committee could be forced to hike interest rates from 4.25 per cent to 4.5 per cent in May, and possibly even higher later this year, to ensure inflation is being brought properly under control.
These increases will feed through into higher mortgage bills for millions of homeowners, and also drive up rents.
Inflation is still expected to fall sharply in the summer after energy costs dropped compared with their stratospheric peaks.
While this means that overall prices will not be rising so fast, it does not herald a fall in the cost of so many daily necessities, which are stretching the budgets of many households.
Experts still expect Rishi Sunak to meet his pledge to halve inflation by the end of the year.
But the UK’s rate of inflation is the third highest in the G20 group of leading economies, behind only Argentina and Turkey. Inflation in the US fell to five per cent last month while across the EU, price rises average 6.9 per cent.
After the latest prices data dropped at 7am, Chancellor Jeremy Hunt said: “These figures reaffirm exactly why we must continue with our efforts to drive down inflation so we can ease pressure on families and businesses.
“We are on track to do this — with the OBR forecasting we will halve inflation this year — and we’ll continue supporting people with cost-of-living support worth an average of £3,300 per household over this year and last, funded through windfall taxes on energy profits.”
But shadow chancellor Rachel Reeves said: “The question for families remains as real as ever — when will they feel better off under this Conservative government?
“And why, when the cost of living continues to bite, is the Government refusing to freeze council tax this year, paid for by a proper windfall tax on oil and gas giants?”
Karen Betts, chief executive of the Food and Drink Federation, said: “Food and drink price inflation remains stubbornly high because it takes some months for the rising prices that manufacturers pay to produce food and drink to filter through into the prices that shoppers pay on high streets and in supermarkets. And, while we have seen some ingredient and production costs start to come down from the exceptional peaks of recent months, those declines have not been consistent across the board.
“Meanwhile, many of the underlying drivers of inflation are still in play — with, for example, energy costs still double what they were in 2019 and rising labour costs.”
The high food inflation was partly offset by lower fuel costs, with petrol and diesel down 5.9 per cent against the same month last year after prices had spiked following Russia’s invasion of Ukraine.
In the City, traders are concerned that interest rates will have to go up at least twice more for the Bank of England to have any chance of bringing the CPI back down to its two per cent target.
“The smaller-than-expected fall in CPI inflation in March and the stubbornness of core inflation, which stayed at 6.2 per cent, suggests that the Bank of England will raise interest rates from 4.25 per cent to 4.50 per cent at May meeting,” said Paul Dales, chief UK economist at Capital Economics.
“The risk of that not being the last hike is growing.”
Ed Monk, associate director for personal investing at Fidelity International, said: “It’s now clear the UK has an inflation problem that is worse and more persistent than in Europe and the US.”