The governor of the Bank of England today gave an "apocalyptic" warning that food supplies could tighten and prices soar due to the war in Ukraine.
Andrew Bailey used the eye-popping phrase as he admitted the situation is “very, very difficult” as inflation soars.
And despite talks on whether to use interest rate rises to bring inflation under control, Mr Bailey admitted “there’s not a lot we can do about 80% of it”.
The normally reserved Bank chief said “Ukraine and Russia is the big risk in a way," including the risk of a further energy price shock if gas and diesel supplies are cut off.
Speaking to the Commons Treasury Committee he added: “I’m afraid the one I’m going to sound, I guess, rather apocalyptic about, is food.
“So I was in Washington at the IMF World Bank Spring meeting… we had the Ukrainian finance minister there… I have to tell you I think this is a big concern.
“Because I think two things the finance minister said - one is Ukraine does have food in store but it can't get it out at the moment.
“Two, while he was optimistic about crop planting, as you know Ukraine is a major supplier of wheat and… cooking oils… we have no way of shipping it out as things stand and it is getting worse.
“That is a major worry - and it’s not just I have to tell you a major worry for this country, it is a major worry for the developing world as well.
“Sorry for being apocalyptic for the moment, but that’s a major concern.”
It came as he blasted claims he was “asleep at the wheel” over inflation by claiming: “We can’t predict things like wars.”
Mr Bailey said critics had the benefit of “hindsight” as he was confronted with figures showing runaway inflation of 7% with the rate tipped to hit 10% - despite the Bank’s task of keeping it to 2%.
Committee chairman Mel Stride told him: “The ability of the Bank to forecast inflation seems to have been rather amiss for some period of time.”
Telling him that critics accused the Bank of “being asleep at the wheel”, Mr Stride told the Governor they believed “you should have done more on the monetary side far earlier ahead, got on top of inflation, had you been smarter at what you had done”.
Mr Bailey hit back: “I do see comments around hindsight.”
Pointing to supply side “shocks” such as shipping backlogs, China’s “zero-Covid” policy and Russia’s invasion of Ukraine, he told MPs: “We can’t predict things like wars, that’s really in our power - not sure it's anybody's power, really.”
Discussing factors the Bank uses when looking at the economy, he said: “The world wheat prices has gone up just under 25% since I think we were here at the last hearing.
“So we use those prices, and of course those prices will therefore include a view of what could evolve.
“But I have to tell you based on what on what we’ve seen over the last year - and going back to our earlier discussion - there’s a lot of uncertainty, a lot of uncertainty around this situation.”
He added natural gas spot prices have fallen over the last month or so but forward prices - which the energy bills cap is based on - have not.
Appearing to predict another big rise in bills on October 1, he said: “I’m afraid we’ve got a leg up in that later this year”.
He added: “It is very very - more than uncomfortable, I’ll try and think of a word that’s even more severe than that - it’s a very very difficult place for us to be in.
“To forecast 10% inflation and then say… there’s not a lot we can do about 80% of it.
“I can tell you, it’s an extremely difficult place to be. We have to recognise the reality of the situation we face.”
