Yahoo News ‘Apocalyptic’: Why experts fear a steep surge in food prices
Bank of England (BoE) governor Andrew Bailey has told MPs the war in Ukraine is leaving the UK facing "rather apocalyptic" levels of food inflation.
The BoE boss said the bank is facing "the biggest test" of its monetary frame work in 25 years amid the rising cost of living.
Often referred to as "the breadbasket of the world", Ukraine is one world's greatest exporters of cooking oil and grain.
Due to Russia's invasion, there are major disruptions to supply chains.
In 2021, Ukraine was the sixth biggest exporter of wheat at about 10% of the global market. Together, both Russia and Ukraine provide over 25% of the world's wheat exports, and around 80% of sunflower oil exports.
Read more: Bailey defends Bank of England on inflation: 'We can't predict war'
"The one which I might sound rather apocalyptic about, is food," said Bailey when discussing challenges facing the economy.
“Two things the [Ukrainian] finance minister said is that there is food in store but they can’t get it out.
“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.
“It is a major worry for this country and a major worry for the developing world.”
The warning comes after the World Bank said expensive food and energy will persist for the next three years due to the war and that it is the "largest commodity shock" since 1970s.
“Overall, this amounts to the largest commodity shock we’ve experienced since the 1970s.
"As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilisers," said Indermit Gill, a World Bank vice-president.
“These developments have started to raise the spectre of stagflation.
"Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy.”
Read more: 'F***ing disgrace': Martin Lewis condemns energy watchdog for 'selling consumers down the river'
Earlier this month, the BoE raised interest rates to 1% in attempt to bring down inflation which is at 7%, the highest in three decades. And, in a bleak warning, the Bank are predicting inflation to surpass 10% this year.
One former BoE chief said the situation has surpassed his "worst expectations".
"I think [inflation] could [pass 10%], I fear it might," said Andy Haldane, former chief economist at BoE.
"This isn't a new thing, even this time last year... I was worried that price pressures were bubbling up. As it's turned out things have even surpassed my worst expectations.
"We're now looking prospectively at double digit interest rate of inflation, which is not quite getting back to the 1970s but getting on that way."
Rachel Reeves, shadow chancellor, has criticised government's management of inflation after figures from the Office for National Statistics (ONS) last week showed the economy shrank by 0.1% in March - raising fears of a recession.
“That the Chancellor ignored serious warnings undermines any claim he couldn’t have done more to protect the British economy from soaring inflation," said Reeves.
“The government's Queen's Speech this week was out of ideas and out of touch, devoid of any real economic plan for growth or to tackle the cost of living crisis.
“Anything less than coming back urgently with an emergency budget to help ease the pressure from the cost of living crisis is a failure by this Conservative government.”
The warnings on inflation come as the Office for Budget Responsibility (OBR) in March said that Brits are facing the biggest drop in living standards since records began.
Watch: Bank of England predicts cost-of-living 'hardship'
