UK central bank: Apocalyptic inflation rise beyond our control

Numerous British publications—like the Independent—reported Bank of England Governor Andrew Bailey’s statements where he blamed the war in Ukraine for the highest inflation in the U.K. in the last three decades during a speech to the House of Commons Treasury Committee. He also warned that the “apocalyptic” rise in food prices caused by Russia’s invasion will be disastrous for the world’s poor. 

While Bailey claimed that 80 percent of the rise in inflation was due to international “shocks” that are beyond domestic control, he stated that the food crisis poses a threat to many countries. 

Upon being asked by parliamentarians, “Are you helpless in the face of inflation?” Bailey responded, “ A sequence of shocks like this, which have come really one after another with no gaps in between them, is almost unprecedented. It’s a very, very difficult place to be.” 

“This is the biggest test of the monetary policy framework in 25 years. There is no question about that,” Bailey said, adding that an energy crisis, which may break out as a result of the issues experienced in the supply lines in China due to the pandemic, and Russia completely cutting off natural gas may further challenge the economy. 

When asked whether rising interest hikes sooner would have prevented the rise of inflation, Bailey said the following to the Treasury election committee: “I don’t think we could. I don’t think we could foresee a war in Ukraine.” With this, he stated that foreseeing war is not – or cannot be – their job, and touched on the impossibility of taking actions months in advance based on a projection regarding war. 

Hearing these words straight from the horse’s mouth on a subject Türkiye will always face objections on is much more beneficial for everyone. The fact that these statements were not published by the press advocating for the Turkish opposition is normal, however, it is problematic that they were not mentioned in any of the remaining media outlets. 

It will also help to review the data revealed this week on the inflation in Türkiye’s agriculture products in relation to the above topic: 

The Turkish Statistical Institute (TÜİK) announced the Agriculture Producer Price Index (PPI) for April 2022. Accordingly, Agriculture-PPI saw a 17.76 percent rise in April 2022 compared to the previous month, a 72.29 percent rise compared to December in the previous year, a 118.53 percent rise compared to the same month in the previous year, and a 45.26 percent rise compared to the annual average. 

The subgroups with a low annual increase were citrus fruits with a 21.82 percent hike, and the unprocessed milk and fat of sheep and goats, which rose by 45.18 percent. In contrast, the subgroups that saw a high annual increase were fibrous plants, vegetables, melon, and tuberous roots with a 248.33 percent hike, and grains (excluding rice), legumes, and oilseeds with a rise of 135.01 percent. 

The more agricultural input prices rise, the further all costs spiral upward. During this process, which is influenced by global effects, every country is going to need to produce solutions specific to its own state of politics and welfare. 

As it is still early for analyses such as the wage-price spiral, which requires communal support, producers need to balance their input costs during this process. 

Türkiye’s Agriculture and Forestry Minister Vahit Kirişçi needs to determine the basic household products, and provide special input for seasonal products such as oil, flour, tomatoes, capsicums, eggplants, cucumbers, potatoes, and onions to alleviate the social impact of agricultural inflation. We need to remember that desperate times call for desperate measures.