Food Prices Unlikely to Fuel Inflation, U.S. Officials Say

Rising food prices propelled by the drought in America’s farm belt are unlikely to cause any long-term inflation, Reagan Administration officials said today.

In separate statements, Treasury Secretary James A. Baker III and economics adviser Beryl W. Sprinkel downplayed the impact of the worsening drought on the U.S. inflation rate.

The drought threatens to cut significantly into this year’s harvest of wheat, corn, soybeans and a host of other food crops.

But Baker said a recent rise in commodity prices does not spell danger. “We think (the inflation rate is) under control and we think it’s going to stay that way,” he said.

Sprinkel said inflation at year’s end should be about 4%, adding, “I do not think (the drought) will ruin our strategy of keeping inflation subdued, but it’s certainly painful for farmers.”