Climate change risks fuelling inflation as crops fail, warns Bailey

CLIMATE change causes crops to fail, which is fuelling food price rises, the Governor of the Bank of England has warned. Andrew Bailey said last night that even as food inflation was slowing in the UK, significant risks to consumer prices remained. Speaking at the Henry Plumb Memorial Lecture, hosted by the National Farmers’ Union, he said: “There are clearly risks as we look ahead to the months and years ahead. “Food inflation can be volatile in the best of days. And climate change is affecting weather patterns, increasing the risk of poor harvests.” Food prices are rising at the fastest level in more than 45 years and were one of the key drivers of Britain’s inflation crisis over the past year, peaking at 19.2pc in March. Price rises have since slowed to 10.1pc in the year to October. Mr Bailey added: “New, hardier crops may become an important source of nutrients globally, but the development of such variants may be years away.” Mr Bailey suggested that extreme weather events risked leading to higher inflation. He said: “If we think that climate change is going to create more supply-side volatility, then it will have an effect on prices. It doesn’t necessarily mean interest rates will be higher but it will be a factor”. He also cautioned that increasing protectionism could trigger price spikes with countries prioritising their own domestic food supply at a time of scarcity. The Israel-hamas war could also further fuel energy price spikes and thereby food costs, he said. The warning comes as Britain faces broccoli shortages. Growers highlighted that they had been challenged by the second wettest October in 53 years. Food prices have risen by 30pc since the pandemic and are still going up. Mr Bailey also issued his firmest iteration yet that expectations of falling interest rates are premature. He said inflation falling by more than expected to 4.6pc last week was “welcome news” but the “last mile” was still ahead. Mr Bailey said: “It is far too early to be thinking about rate cuts.”