The Bank of England on Thursday announced a shock interest rates hike to 5% as inflation remained steadfast across April and May.
Supermarkets have been warned by the Prime Minister that they must behave “responsibly and fairly” when it comes to pricing as consumers battle inflated costs.
Rishi Sunak said he wanted to see the burdens of the weekly shopping bill “easing” as ministers engage with retailers over prices.
Chancellor Jeremy Hunt has confirmed that ministers are talking with the food industry about “potential measures to ease the pressure on consumers”.
The remarks by the top two figures in Government come after the Bank of England governor Andrew Bailey suggested some retailers were raising prices as a way of increasing their profit margins in a time of stubborn inflation.
The Bank on Thursday announced a shock interest rates hike to 5% as inflation remained steadfast across April and May, with the Consumer Prices Index (CPI) inflation remaining at 8.7% despite forecasts it would fall.
Addressing workers at a warehouse in Dartford, Kent, Mr Sunak said he recognised that household weekly shopping bills had “gone up far too much in the past few months especially”.
He added: “We’re looking at the supermarkets, making sure that they’re behaving responsibly and fairly when it comes to pricing all those products, to make sure that we’re easing the burdens on your weekly shop.”
It comes after Mr Bailey, in a letter to the Chancellor following the rate rise announcement, said some shops might be “rebuilding” their profit margin by passing inflation costs to consumers via increased prices.
“The continued pass-through of costs to consumer prices may also be indicative of some rebuilding of profit margins by retailers,” the governor said.
But the governor appeared to suggest that the practice was not widespread among retailers or wholesalers.
In his reply, Mr Hunt noted the Bank’s observation before adding: “The Government is focusing on measures that help tackle increasing costs in the food sector and we will continue to engage with the food supply chain on potential measures to ease the pressure on consumers.”
The thinly-veiled plea to the retail industry not to hike prices further follows warnings about struggling household finances during the cost-of-living crisis, which is being driven by inflation.
Figures from the Money Advice Trust show that since March 2022 the number of adults who are behind on one or more household bill has risen from 7.9 million to 11.6 million.
While Office for National Statistics (ONS) data published on Wednesday showed that the increase in food prices slowed between April and May after reaching a 45-year high in March, it remained at 18.4% last month.
According to analysis by the Labour Party, the average UK household is paying more than £1,000 per year extra for food than in 2020/21, with Britons experiencing faster price rises than their counterparts in G7 member states, including Germany and the US.