mean that we should underplay the effects of the shock to food prices that we have experienced. we can look instead at the margin by which food price inflation has exceeded overall inflation as in chart 8. this is a measure of the relative price effect – of how much more food prices have risen relative to the prices of other goods and services. when we look at that measure, the recent period looks more severe in the context of the inflationary episodes of the 20th century. the prices of the essentials in life have gone up a lot, also relative to other goods and services. ga etween ons mer r e n lat on and ood and non al ohol and bank al everages n lat on lat ons and it is important to recognise that underlying the aggregate is a wide range of experiences at the household level. chart 9 shows the typical share of food in consumption for households across the distribution. for the 10 % of households that have the least to spend, expenditure on food makes up more than a quarter of consumption, just over twice the national average. at the other end of the spectrum, for the 10 % of households that spend the most, the expenditure weight on food is just 6 %, about half the national average. bank of england hare o ho sehold ex end t re on ood and bank al ex end t re de le lat ons when there is a shock to food prices, like the one we have seen recently, the consequences are not felt equally across society. the poorest are hit the hardest. the recent experience the covid pandemic was a major shock to the global economy. global agricultural commodity prices rose by around 20 % over 2021, which along with other rising cost pressures drove up food prices globally. 12 this affected food price inflation in the united kingdom too. in january 2022, annual food price inflation stood at 4. 3 %, compared to an average of just below 1½ % over the previous three years. poor weather was undoubtedly a factor. harvests had een oor n man o the world ’ s most important agricultural regions. and strained supply chains affected the distribution of agricultural commodities and food products as well as other goods. 13 in the united kingdom, a combination of heavy rainfall and droughts had caused the harvested production of wheat to drop to the lowest level in 40 years in 2020, before rebounding in 2021. 14 b t ss a ’ s war on ukra ne made

new investment opportunities in the us has attracted capital inflows to finance higher investment, which in turn has led to a strong dollar. if expectations about higher productivity growth prove well - founded, then us businesses and families will gradually repay the debts they have incurred, and the current account deficit will subside, with an adjustment of the dollar accordingly. although the imbalances will unwind, they will do so slowly, allowing the us economy to recover from its present slowdown. but if there were to be a reappraisal of the extent to which productivity growth had increased, then a more sudden downward adjustment to spending could result. in such circumstances, the imbalances would unwind more rapidly, leading to adjustments in asset prices, both in stock markets and exchange rates. that would imply a much bumpier ride for both the united states and the world economy in the months ahead. clearly, there have been some downward adjustments to stock prices in the us over the past year. but their scale has been limited, and there does, at least so far, appear to be no significant reappraisal of the impact of new technology on us productivity growth. although it is not easy to reconcile the recent sharp falls in confidence in the us and the relative stability of stock market prices, it would appear that investors generally have taken comfort from the federal reserve's ability and willingness to react to the latest data, and take appropriate action. the second cloud on the horizon is the risk to emerging market economies posed by the us slowdown and the unwinding of imbalances in the industrialised world. in some emerging markets, especially those in east asia exporting high technology products to the united states, the immediate outlook is for weaker economic growth. but for other countries, especially in latin america, the fall in us interest rates and in the dollar against the euro will mitigate the direct loss of export demand. but the major concern is to avoid another financial crisis, of which there have been too many in the past five years. from mexico in 1995, through the asian crisis in 1997 and brazil in 1999, and, more recently in argentina and turkey, sudden reversals of short - term capital flows have created financial crises. in many cases, these crises have proved devastating to the citizens of the countries affected. the existence of deep and liquid international capital markets offers opportunities for greater risk diversification by both borrowers and lenders. but it also increases the risk of contagion from