Kroger CEO Rodney McMullen told CNBC on Thursday that he does not expect problematic food inflation in 2021, noting that prices could fluctuate from month to month.
“For the whole year, we expect inflation to be 1 to 2%, which is a pretty normal number,” McMullen said on ‘Closing Bell’.
The grocery manager’s outlook is in line with food price forecasts at the home of the Bureau of Labor Statistics’ consumer price index. McMullen’s comments come as the topic of inflation in the broader US economy focuses sharply.
Wall Street has been paying attention for weeks to rising yields on the standard 10-year treasury, which was about 1.547% on Thursday. Yields were sometimes below 1% in January, but this increased due to a strong economic recovery from the coronavirus pandemic, in addition to a possible increase in inflationary pressures.
Federal Reserve Chairman Jerome Powell said on Thursday that he would see some upward pressure on prices, but indicated he did not believe it would be long enough for the central bank to raise interest rates. The Fed lowered the target band for its overnight fund rate to near zero last March as the pandemic escalated.
“We expect that as the economy reopens and hopefully increases, we will see inflation increase through the underlying effects,” Powell said Thursday at the Wall Street Journal Jobs Summit.
As for the prices of grocery stores, McMullen said there could be volatility, especially when compared to 2020 levels during the early parts of the pandemic.
“If you look at the second quarter a year ago, we had big inflation in meat,” McMullen said, which happened after the health crisis led to the closure of meat packaging plants.
“This year we would expect there to be fairly large deflation, so if you look at it as a whole, we are still on the estimate of 1% to 2%, but it will be very bumpy along the way,” McMullen said.
Shares in Kroger closed 2.5% higher at $ 34.09 a share on Thursday. The company reported fourth-quarter results earlier in the day, and analysts’ analysis was earnings per share of $ 0.81. Quarterly revenue of $ 30.74 billion did not fall below Wall Street’s forecast of $ 30.86 billion.