The food price index rose at an annual rate of 31 percent in October due to a plethora of reasons, including droughts, bad weather, and global supply chain issues.
Henryk Kowalczyk, Poland’s agriculture minister, told the Financial Times that a global “food prices crisis” could be looming and could contribute to the strain on the global economy trying to emerge from COVID-19 lockdowns. The report said these rising food costs “combined with surging energy prices have the potential to imperil the livelihoods of millions of people around the globe.”
The UN’s Food and Agriculture Organization determined that the international prices of a basket of food are up three percent from September and the price of wheat increased by five percent. That increase contributed to food prices hitting a 10-year high.
In the U.S., grocery prices in October increased by 5.4 percent and overall inflation was 6.2 percent, according to the latest consumer price index.
“Tighter availability in global markets due to reduced harvests in major exporters, especially Canada, the Russian Federation, and the United States of America, continued to put upward pressure on prices,” the FAO said of wheat prices, according to Reuters.
Consumers’ pessimism resulted from “an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,” Richard Curtin, the survey’s chief economist, said in a statement announcing the survey results.
A quarter of consumers responding to the survey said that inflation has forced them to reduce their living standards, with older and lower-income consumers hit hardest.
Although many consumers reported that their nominal incomes had risen, half said they expect inflation to reduce their actual purchasing power next year.
TRENDPOST: U.S. Federal Reserve officials continue to stress that inflation’s pace is “temporary” and will ease as supply chain knots unravel and the labor market steadies. Again, they never mention the reality of their pumping in trillions of cheap money into the equity and bond markets, keeping interest rates deeply negative when accounting for inflation… and are totally silent about the trillions Washington has injected into the economic system that has pushed inflation higher. And despite these realities, there is barely a mention of their outright hypocrisy in the mainstream business media.
TREND FORECAST: As we have said, even when supply-line clogs are cleared, there will be continued surges in demand for goods that the clogs kept from the market for months.
That continuing demand will continue to push inflation beyond any definition of ‘temporary’ and will press the Fed harder to raise interest rates sooner.
Barring a Black Swan event, we predict the Fed will begin raising rates before June 2022.