Food Prices Are Going Bananas—And Your Credit Card Rates Could Follow

Certain foods are getting pricier, and even the Federal Reserve is taking notice.

A supermarket meat counter. Photo: Anthony Albright/ Flickr

A supermarket meat counter. Photo: Anthony Albright/ Flickr

If it feels like your July 4th cookout was pricier than last year, you’re right: The cost of ground beef is up more than 10% and pork chops more than $12% compared to this time in 2013, reports the Wall Street Journal. And the fixin’s are dearer too: tomatoes are up 12% and putting cheese on your burger costs 11% more than last July 4th according to Rabobank’s BBQ Index.

However the reasons are disparate and wide ranging. Droughts in Oklahoma, Texas, California and Brazil are pushing up prices for beef, fresh fruit, and coffee. Diseases have decimated American pig herds and South East Asian shrimp stocks. But the industries that have avoided those misfortunes have seen minimal price increases. According to the WSJ, baked goods cost a mere 0.1% more than last year, and vegetables 0.5%.

stats Food Prices Are Going Bananas—And Your Credit Card Rates Could Follow

You need only remember the short-lived but extreme price hike of limes earlier this year to know that food costs fluctuate on the reg. And that could be one reason the cost of eating out—up 2.2% since last year—hasn’t increased beyond average inflation; restaurants may be adjusting menus or simply swallowing the increased expense of certain items with the expectation that this too will pass. But the WSJ reports that the Federal Reserve—which, among other things, keeps inflation under control—isn’t so sure, and is keeping a watchful eye on grocery store checkout totals.

“For the Fed, the issue is do they ignore it, or do they see it as a sign that broadly inflation is picking up?,” explains WSJ chief economic correspondent Jon Hilsenrath. “If it’s broad inflation they have to pull it back…but if it’s narrowly confined to food then they’re going to be prepared to look past it, even though it hits a lot of people’s pocketbooks.”

checkout Food Prices Are Going Bananas—And Your Credit Card Rates Could Follow

Photo: Steve Koukoulas/ Flickr

If it turns out that the rising cost of food is a general, long-term trend that isn’t isolated to a few sectors of the industry, the Fed could raise interest rates to try and combat inflation. To state things oversimplistically: When interest rates are low people spend more money, which can mean higher demand for goods and a subsequent increase in prices. When interest rates are high the opposite can occur—consumers are more thrifty, demand drops and prices often follow.

But these regulating strategies take time to show results, and don’t necessarily relieve the current pressure at the supermarket checkout, especially for those who are already struggling to make ends meet. The poorest Americans spend the largest proportion of their income on food: 16.1% as compared to the 11.6% spent by the wealthiest, according to the Atlantic. Federal Reserve officials aren’t the only people waiting to see if the cost of beef and pork will come down soon.

[via the Wall Street Journal]

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