Food Price Slump May Relieve Central Bankers' Inflation Headache
For all the worry about soaring oil and metals prices fuelling inflation, consumers may at least catch a break at the dinner table.
Globally, food prices have been in decline for the past three months and in December costs fell the most in more than two years.
Food got cheaper thanks to a slump in prices of sugar and dairy products from cheese to butter, the United Nations’ Food and Agriculture Organisation said Thursday.
Prices of meat, grains and vegetable oils fell too.
Lower prices of staples may help restrain inflation at a time when investors are betting it will pick up, spurred by a surge in commodities and the fastest world economy since 2011. A Bloomberg gauge of 22 raw materials rose for a record 14 days in a row last week, reaching a three-year high.
Central banks often try to set aside volatile food prices when deciding on interest rates, although staples do form a bigger part of inflation baskets in developing nations such as India. Even so, cheaper food will leave households with more disposable income to spend on non-essential items, helping demand.
While oil and metals prices gained from stronger manufacturing, agricultural commodities have been mostly stuck in the doldrums due to a glut of everything from sugar to wheat. The Bloomberg agriculture sub-index of futures contracts reached a record low last month.
The FAO Food Price Index fell 3.3% in December, the most since August 2015. In sugar, booming output from the European Union to Asia is adding to a glut, and dairy prices are softening after a 2017 surge amid a butter shortage.