European Retail Food Price Inflation

Retail food price inflation has risen markedly across the EU in recent years but with substantial variation across EU Member States. Indeed, retail food inflation has varied more between Member States than between the EU - 25 and other developed countries. To some extent, this is all the more surprising given the 'single market' which characterises the EU but is likely to reflect the considerable differences in food chain structures and levels of economic development that exist within the EU. This article sets out the research issues associated with the experience of retail food inflation across the EU which are currently being addressed in a recently funded EU project on the 'Transparency of Food Prices' (TRANSFOP). Attention focuses on food chain structures, market concentration and the mis-use of unequal bargaining power, and their implications for price transmission. As background, we outline the retail food price inflation experience over the last 20 years or so and suggest that what is key for policymakers is the role retail food price inflation plays in overall inflation. In contrast to the past, the current relatively high and persistent rates of food price inflation are likely to change the relationship between food and non-food inflation, requiring a reassessment of policy toward food prices.