Bulletin: New food inflation forecasts special

Food inflation to extend into 2028 

Food inflation will peak lower but remain elevated for longer, extending cost pressures on households and businesses into 2028. 

• Food inflation now forecast to peak at 5.0% in H2 2026, averaging 3.3–4.3% for the year.

• Expected to stay elevated through 2027 and into H1 2028.

• Lagged effects from geopolitical tensions, energy and supply chains continue to feed through.

• Shopper confidence remains subdued as consumers anticipate further pressure.

The outlook signals a prolonged and uncertain trading environment, with continued margin pressure across the food system. 

See the new IGD Viewpoint report, Food inflation forecasts 2026-28 

CPI steady as food inflation declines 

CPI inflation remained unchanged at 2.8%, while food inflation fell to 2.2% from 3.0%, signalling some easing in price pressures. The decline was driven by small downward contributions from four categories: meat (notably beef and cooked ham), dairy (particularly cheese), vegetables, and fish. These effects were partly offset by a modest increase in oils and fats. While headline pressures are softening, movements across categories highlight continued volatility within the food system. 

IGD opinion 

Latest food inflation data is softer than expected, helped by earlier commodity easing and retailers protecting volumes. But underlying cost pressures remain, meaning inflation is likely to build later in 2026 and stay above average for longer. 

Middle East: US-Iran deal 

A provisional US–Iran agreement has been reached in the form of a memorandum of understanding (MoU), marking a short‑term framework rather than a full settlement. The deal establishes an immediate ceasefire and a 60‑day window to negotiate a final agreement, while committing to reopen the Strait of Hormuz and lift the US naval blockade.  

It also sets out initial sanctions' waivers, including allowing Iranian oil exports during the negotiation period, with broader decisions on nuclear arrangements and long‑term sanctions relief deferred to further talks.  Brent crude has fallen to around $78 a barrel, close to its lowest level since late February. 

See our latest article, US-Iran peace deal: food industry impact 

IGD opinion 

While the agreement reduces immediate escalation risk, key details remain unresolved and further talks are required. Its impact will depend on whether the ceasefire holds and whether markets view the deal as credible. For now, it signals de‑escalation but not a return to normal conditions. 

Labour market weakens further  

The latest ONS labour market data points to a softer jobs market, with payroll employment falling and vacancies continuing to decline. This increases downside risk to household demand and workforce stability. 

Payrolled employees fell by 138,000 over the year to April 2026. The employment rate was 75.0% in February to April, while vacancies continued to fall, reaching 705,000 in February to April - the lowest level since 2021. 

Pay growth is also easing, suggesting the labour market is becoming less able to sustain recent real income gains.  

Interest rates held 

The Bank of England has kept interest rates at 3.75%, maintaining a cautious stance as inflation remains above target. While inflation has eased to 2.8%, it is expected to rise again later in 2026 as higher energy costs continue to feed through, highlighting a more uncertain outlook. The Bank also flagged risks from second‑round effects in wages and prices, signalling that policy will remain restrictive until inflation is on a sustained path back to target. 

Learning Disability Week 

Across England, more young people are being identified as having special educational needs (SEN), part of the wider special educational needs and disabilities (SEND) landscape 

• Over 1.7m pupils in England have SEN, yet only 6% of adults with learning disabilities are in paid work.

• That is why IGD is hosting employability workshops with SEND schools during Learning Disability Week.

See our article, Opening doors to SEND talent

New food minister 

Stephen Morgan has been appointed Minister for Food Security and Rural Affairs following a government reshuffle, signalling continuity in the food security brief but with an early emphasis on green growth, environmental protection, and support for rural economies.