Tesco (TSCO.L), Britain’s largest grocery chain, has dropped milk prices for the first time since May 2020, suggesting food inflation may slow.
According to Kantar, supermarket inflation reached 17.5% in March, with milk, cheese, and eggs rising quickly. Official UK food and non-alcoholic drink inflation was 18% in February, the highest since 1977.
Tesco, which has a 27% share of Britain’s grocery market, said on Wednesday it was reducing the price of a four-pint carton of milk from 1.65 pounds ($2.05) to 1.55 pounds, two pints from 1.30 pounds to 1.25 pounds and a pint from 95 pence to 90 pence.
“We’ve seen some cost price deflation for milk throughout the market in recent years,” Tesco UK CEO Jason Tarry said.
The price drop would not affect Tesco’s milk farmer payments.
Tesco reportedly “locked in” prices on over 1,000 daily items until July 5, including Yorkshire Tea, McCain oven chips, Shredded Wheat, Kenco instant coffee, and Aquafresh toothpaste.
Official figures indicated 10.4% UK consumer price inflation in February, driven by the pub and restaurant food and drink costs.
The Bank of England predicts a steep decrease in the current quarter to below 4% by year’s end.
Tesco will release full-year earnings Thursday.
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