In an exclusive interview with Yahoo Finance, U.S. Treasury Secretary Janet Yellen spoke about the recent price hikes seen at grocery stores and restaurants across the country and what's causing this inflation.
Citi Senior Global Economist Robert Sockin joins Wealth! to analyze Secretary Yellen's comments and offer insight into how food prices are likely to perform going forward.
Commenting on fast food chains introducing value menus to ease the burden on consumers, Sokkin said: “It will be beneficial to see these policies being introduced. But more broadly, as you said, the bigger issue is that food prices have risen significantly over this economic cycle, and it's actually taken people time to adjust to these significantly increased prices. As I pointed out, as incomes have risen, real purchasing power has increased, and is likely to continue to increase given that food inflation is still at a relatively low level.”
“I expect that over time, this issue will become less burdensome, but I would like to see more policies like those adopted by Target (TGT) and other fast-food chains,” he said.
Watch Yahoo Finance's full exclusive interview with U.S. Treasury Secretary Janet Yellen.
For more expert insights and the latest market trends, click here to watch this full episode of Wealth.
This post was written by Nicholas Giacobino
Video Transcript
Consumer confidence fell in June, with Americans saying rising prices, especially for food and groceries, are weighing on their view of the economy.
In an exclusive interview, our reporter Jennifer Schonberger asked Treasury Secretary Janet Yellen about food price inflation.
And she said,
So yes, there may be some margin growth, but I think it's primarily reflecting the increased costs, including labor costs, that the companies, the grocery companies, have experienced.
Um, I met with a group of CEOs today, including the CEO of Target, and they explained and announced that they understand that families are struggling with expenses like food, and so they have implemented price cuts on bread, milk, diapers, and other basic purchases that are household necessities.
And I think that's something to be celebrated.
I think that sort of thing would be useful.
So the Secretary of the Treasury said which company he was talking to, we are doing a good job of fighting inflation.
Joining me now is Robert Singh, Senior Global Economist for the City of London.
Robert, it’s been a pleasure speaking with you and hearing your perspective on this matter.
The story continues
We are making every effort to combat inflation.
Thank you. I really appreciate the invitation.
And as you pointed out, that's really hard.
The consumer confidence figures that you highlighted show that people are sensing the price changes that have occurred over the past few years.
Food inflation is currently running at relatively low levels, but it has nevertheless seen a significant increase this cycle.
Well, the cumulative benefits have been so high that I think people are really seeing it in stores right now.
Well, one good thing is that my income is also increasing.
And as incomes rose and food inflation subsided, real food purchasing power increased.
Um, and number two, as you pointed out, some companies are doing something to try to solve some of these food problems.
Yellen mentioned Target, but some fast-food chains have begun offering better value meals, which could also help address this issue.
But it's a big problem for Americans.
This is especially problematic for low-income families who spend a large portion of their budget on food.
In particular, I think they are feeling the strain of rising prices over the last few years.
Value menus have been introduced more recently to give consumers options to offset some of the price increases, how effective do you think value menus are?
In particular, I think it would be helpful if more of these types of policies were adopted.
Uh, but, as you said, more broadly, the bigger problem is, um, food prices have increased significantly over the business cycle and people are taking time to adjust to these significantly increased prices.
And, as I have pointed out, real purchasing power has increased as incomes have risen and is likely to continue to increase given that food inflation remains relatively low.
So, we hope that over time this issue will become less burdensome.
But hopefully, we'll see more policies like the ones that Target and other fast food chains have adopted, because I think it's the low-income families that are bearing the greatest burden, and those policies will really help ease the hardship that people feel when they go to the grocery store or when they go out to eat.
