Markets & economy - Food price inflation: Are we watching "That '70s Show"?

Unaffordable food and fuel prices are raising developed market consumer inflation to multi-decade highs, while the Federal Reserve recently announced a 50-basis point hike in US interest rates from record lows. Thalia Petousis, portfolio manager at Allan Gray, discusses what this may mean for South African investors in terms of inflation, bonds and more. 

Food price inflation is a powerful force precisely because it impacts the consumer so directly, making it an intensely political phenomenon that governments and central banks cannot ignore – or can do so at their peril. In the 1970s when US food inflation reached 20% year-on-year, housewives began organising rallies in protest, ultimately staging a week-long boycott of meat. It is no surprise, then, that when Jerome Powell, the current chair of the US Federal Reserve (the Fed), raised interest rates this month, he began his speech by saying, “I’d like to take this opportunity to speak directly to the American people”.

May 26 2022 By Thalia Petousis - Allan Gray