As overall consumer prices continue to rise, the CEO of Olive Garden’s parent company predicts that it will increase the cost of food at its restaurants by 4 percent over the next two quarters. The move is to help offset the company’s 9 percent quarterly increase in food and beverage costs driven by rising inflation.
Many restaurants and restaurant companies seek to compensate for rising prices for labor and food by raising prices for customers that many are willing to pay. This includes Darden Restaurants, which owns brands such as Olive Garden, Longhorn Steakhouse, Yard House, Bahama Breeze and Season 52, according to the company’s website.
Darden’s CEO, Gene Lee, recently told investors that this is “the toughest inflationary environment in years.” The company’s food and beverage costs rose 9 percent during the quarter, while hourly wage costs also rose 9 percent as Darden tried to lure workers with higher wages.
The company said it increased prices by 2 per cent during the quarter. Those higher prices haven’t dampened consumer demand yet, said Rick Cardenas, Darden’s president and chief operating officer.
Inflation jumped at its fastest year-on-year pace in nearly four decades in December, rising 7 percent and cost overruns for consumers, offset by recent wage gains and addressing mounting pressure on President Joe Biden and the Federal Reserve. To which is increasingly central to the US economic concern.
Prices have risen during the recovery from the pandemic slowdown as Americans increase spending on goods such as cars, furniture and appliances. Those increased purchases have closed ports and warehouses and exacerbated supply shortages of semiconductors and other parts. Gas prices, while falling slightly from November to December, have risen over the past year, as Americans have driven more to cut travel in recent months and come back earlier in the pandemic.
Excluding volatile food and gas prices, so-called core prices rose 0.6 percent from November to December, slightly more than a 0.5 percent increase from October to November, the Labor Department reported Wednesday. Measured year over year, base prices rose 5.5 percent in December, the fastest increase since 1991.
Rising prices have erased the healthy wage growth that many Americans are getting, making it harder for families, especially low-income families, to afford basic expenses. Polls show inflation has begun to displace the coronavirus as a public concern, making the political threat clear to President Joe Biden and congressional Democrats.
A significant portion of consumer inflation is still being driven by the pandemic-induced mismatch between demand and supply. The price of used cars rose by 3.5 per cent from November to December and more than 37 per cent from a year ago. With the production of new cars halted due to semiconductor shortages, consumers have switched to older cars, increasing their cost.
Shortages in US grocery stores have also become more acute in recent weeks, as new problems, such as Omicron versions and severe weather, have exacerbated supply chain conflicts and labor shortages, which have plagued retailers ever since. Ever since the outbreak of the coronovirus epidemic.
On Tuesday, Chair Jerome Powell told Congress that the Federal Reserve is prepared to accelerate interest rate hikes starting this year if it deems it necessary to prevent high inflation. Fed officials have forecast they will triple their benchmark short-term rate this year, which has now dropped to near zero. Many economists envision four Fed rate hikes in 2022.
A rise in those rates would increase the cost of borrowing for home and auto purchases as well as business loans, potentially slowing the economy. The rate hike also marks a sharp reversal in policy by Fed policymakers, who as recently as September were divided over whether to raise rates even once this year. The Fed is also sharply ending its monthly bond purchases, which were aimed at lowering long-term interest rates to encourage borrowing and spending.
Yet the Fed’s quick pivot hasn’t quelled questions from many former Fed officials, economists, and some senators as to whether the Fed was too slowly to end its ultra-low-interest rate policies because of accelerating inflation. has worked – and put the economy at risk as a result.
In his testimony to Congress on Tuesday, Powell said the Fed mistakenly believed that supply chain constraints helped push up the prices of goods until they had to. He said once the supply chain opens up, the prices will come down again.
Yet for now, supply problems remain, and although there are signs they are loosening in some industries, Powell acknowledged that progress is limited. He said several cargo ships were parked outside the port of Los Angeles and Long Beach, the country’s largest, waiting to be unloaded.
With the Biden administration facing public discontent over the rise in inflation, President Joe Biden has said that his administration’s investments in ports, roads, bridges and other infrastructure will help reduce inflation by loosening some of the poor supply chains. Will get
The Associated Press contributed to this report.