Kroger CEO Rodney McMullen told CNBC on Thursday that he does not expect problematic food inflation in 2021, while warning that prices could be volatile from month to month.
“For the year as a whole, we expect inflation of 1% to 2%, which is a fairly normal figure,” McMullen said on “Closing Bell”.
The supermarket manager’s outlook is consistent with home-use price forecasts from the Bureau of Labor Statistics Consumer Price Index. McMullen’s comments come because the topic of inflation in the broader US economy is in the spotlight.
Wall Street has been paying attention for weeks to the rising return on the benchmark 10-year Treasury, which was around 1.547% on Thursday. The return was sometimes below 1% in January, but it has risen amid expectations of a strong economic recovery from the coronavirus pandemic, in addition to a possible rebound in inflationary pressures.
Federal Reserve Chairman Jerome Powell said on Thursday that he expects “some upward pressure on prices,” but said he does not believe these will last long enough for the central bank to hike interest rates. The Fed lowered its overnight interest rate target range to nearly zero last March as the pandemic intensified.
“We expect that as the economy reopens and hopefully picks up, we will see inflation rise through base effects,” Powell said at the Wall Street Journal Jobs Summit on Thursday.
With regard to supermarket prices, McMullen said there could be variability, especially when compared to 2020 levels during the early parts of the pandemic.
“If you look at the second quarter of a year ago, we had massive inflation in meat,” said McMullen, which happened after the health crisis led to the shutdown of meat packaging plants.
“This year we expect quite a lot of deflation, so if you look at it overall, we’re still on the 1% to 2% estimate, but it’s going to get really bumpy along the way,” said McMullen.
Shares of Kroger closed 2.5% higher on Thursday to $ 34.09 each. The company reported fourth-quarter results earlier in the day, surpassing analyst estimates with earnings per share of $ 0.81. Quarterly sales of $ 30.74 billion lagged Wall Street’s forecast of $ 30.86 billion.