KC Fed, Report: Tight Labor Markets Have Been a Key Contributor to High Food Inflation

“Although food inflation has eased in recent months, it remains persistently high. Labor-intensive processed food items have accounted for the bulk of recent increases in grocery prices, and tight labor market conditions have put upward pressure on wages and contributed to higher food production costs. If household budgets tighten and demand for food at restaurants continues to recover, some of the price pressures at grocery stores could ease. In addition, monetary policy tightening may help ease food inflation by cooling the labor market, further bringing headline inflation back to target.”