Britain: Food inflation may hit 7% by year's end

Annual food inflation could reach 7 per cent later this year, a leading City economist has warned. The jump, from 1.7 per cent in June, is likely if global food commodity prices continue to rise, said Simon Ward, chief economist at Henderson.

Rising food costs could have the effect of pushing up the consumer prices index (CPI), the official measure of inflation, to 4 per cent – double the Bank of England's 2 per cent target, warned Mr Ward.

The impact on household budgets could even persuade the Coalition to cancel its planned rise in VAT, he added.

"Such an increase [in food prices] would hit consumer spending and recovery prospects and could destabilise inflationary expectations," said Mr Ward.

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