Kroger CEO says he expects normal levels of food inflation this year

Kroger CEO Rodney McMullen told CNBC on Thursday he does not anticipate problematic food inflation in 2021, while cautioning that month-to-month prices may be volatile.

“For the whole year, we expect inflation to be at 1% to 2%, which is a pretty normal number,” McMullen said on “Closing Bell.”

The grocery executive’s outlook matches food-at-home price forecasts from the Bureau of Labor Statistics’ Consumer Price Index. McMullen’s comments come as the topic of inflation across the broader U.S. economy is in sharp focus.

Wall Street has for weeks been paying close attention to the rising yield on the benchmark 10-year Treasury, which was around 1.547% on Thursday. The yield was below 1% at times in January, but it has been increasing on expectations of a strong economic recovery from the coronavirus pandemic, in addition to a potential pickup in inflationary pressures.

Federal Reserve Chairman Jerome Powell said Thursday he does expect to see “some upward pressure on prices,” but signaled he does not believe they will be long-lasting enough for the central bank to raise interest rates. The Fed cut the target range for its overnight funds rate to near zero last March as the pandemic intensified.

“We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects,” Powell said Thursday at the Wall Street Journal Jobs Summit.

With respect to grocery store prices, McMullen said there could be variability, especially when comparing them with 2020 levels during the early parts of the pandemic.

“If you look at the second quarter a year ago, we had huge inflation in meat,” McMullen said, which happened after the health crisis led to closures of meatpacking plants.

“This year we would expect to have pretty large deflation, so when you look at it overall, we’re still at the 1% to 2% estimate, but it will be very bumpy along the way,” McMullen said.

Shares of Kroger closed higher by 2.5% on Thursday to $34.09 apiece. The company reported fourth-quarter results earlier in the day, topping analyst estimates with earnings per share of $0.81. Quarterly revenues of $30.74 billion fell short of Wall Street’s forecast of $30.86 billion.

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