Record fall in food inflation offers hope for borrowers

FOOD price inflation has fallen at its fastest pace on record, fuelling hopes that the Bank of England will be able to start cutting interest rates in the coming months.

New figures from data group Kantar reveal that grocery price inflation stood at 6.7pc in December, down from 9.1pc in November. This is the lowest it has been since early 2022.

Fraser Mckevitt, of Kantar Group, said that the rate of food price inflation was coming down “at the fastest pace we have ever recorded”.

This will bolster expectations that the Bank will be able to ease pressure on households this year by lowering interest rates.

Late last month, markets were predicting a 50pc chance that the Bank of England would lower borrowing costs in spring following a surprise drop in the consumer prices index. As a result, traders are betting that interest rates will fall to 4pc by the end of 2024.

However, despite growing optimism, Mr Mckevitt warned that “consumers are still facing pretty hefty pressures on their budgets” after months of prices pushing higher.

In the run-up to Christmas, shoppers spent a record £13.7bn in supermarkets, which is the equivalent of around £477 for an average household. Mr Mckevitt said that cost-of-living pressures were forcing more shoppers to hunt out discounts, with almost a third of all spending in the weeks before Christmas made on items that were on offer at the tills.

He added: “Retailers were clearly working hard during the festive period to offer best value and win over shoppers, and promotions were central to their strategy.”

It comes amid signs that the price war between supermarkets is heating up, with Morrisons announcing a new wave of cuts on Monday covering 200 items.

Yesterday, budget supermarket Aldi also vowed to cut its grocery prices further. The discount grocers are expecting to step up efforts to draw customers in given the Christmas period is typically stronger for traditional retailers.

Kantar figures revealed that Sainsbury’s and Tesco increased their market share over December. Both have been scaling up their loyalty card schemes to attract more shoppers.

Sainsbury’s hit its highest market share since December 2020 at 15.8pc, according to Kantar, while Tesco held 27.6pc of the market.

On a month-on-month basis, both Aldi and Lidl’s share of the grocery market slipped back.