(Bloomberg) -- As Bank of England policy makers moved to raise interest rates for the first time in a decade Thursday, Wm Morrison Supermarkets Plc signaled that the U.K.’s Brexit-induced jump in food prices is already easing.
“The rate of inflation fell as we went through the third quarter,” Trevor Strain, chief financial officer of the U.K.’s fourth-largest grocer, said on a call with reporters before the BOE announcement. “In our business we expect it to continue to taper down.”
U.K. inflation climbed to its highest rate in more than five years in September, driven by food prices, which rose 0.8 percent in a month, according to the Office for National Statistics. The BOE raised its benchmark interest rate to 0.5 percent Thursday from a record-low 0.25 percent, but it indicated that further rises aren’t imminent given the delicate state of the U.K. economy.
The U.K. imports almost half its food and the fall in sterling that followed the Brexit vote pushed up costs. Food prices in U.K. supermarkets have risen continually for the past year, according to researcher Kantar Worldpanel.
A slowdown in the rate of price increases would alleviate some of the pressure on Britain’s consumers and give retailers more reasons to be cheerful as they approach the crucial holiday shopping season.
Apparel chain Next Plc on Wednesday struck a downbeat note. Chief Executive Officer Simon Wolfson said consumer behavior remained subdued and he expected that trend to persist into the Christmas period.
Beyond the holiday season, Morrison is lobbying the U.K. government on what the retail industry needs from Brexit negotiations, amid a lack of clarity emerging from the talks thus far. Retailers are struggling to plan for the possibility of the U.K. leaving the European Union without a deal, and as that risk increases, executives are breaking their silence on the issue. With the British Retail Consortium warning of backlogs at the country’s ports if the U.K. leaves the EU without a deal, executives are breaking their silence on Brexit.
“It’s a very important subject for the industry and we continue to make ourselves heard,” Morrison CEO David Potts said. “We want sensible, free movement of EU labor. It’s very important that fresh food can speed through customs and that our prices for consumers don’t get undermined by tariffs that are not welcome.”
Morrison reported third-quarter comparable-sales growth of 2.5 percent Thursday, below analysts’ estimates for growth of 2.8 percent. Intense competition is preventing grocers from raising prices to fully offset the Brexit-induced rise in sourcing costs.
The company’s shares fell as much as 1.5 percent in London trading.
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