CEO of Company Behind Olive Garden Says Food Prices Expected to Rise 4 Percent This Year

As overall consumer prices have continued to surge, the CEO of Olive Garden's parent company predicted that it will raise food costs at its restaurants by 4 percent over the next two quarters. The move is meant to help compensate for the company's 9 percent quarterly spike in food and beverage costs driven by growing inflation.

Many restaurants and restaurant companies have sought to offset soaring prices for labor and food by raising prices for customers, which many appear to be willing to pay. This includes Darden Restaurants, which owns such brands as Olive Garden, LongHorn Steakhouse, Yard House, Bahama Breeze and Seasons 52, according to the company's website.

Gene Lee, Darden's CEO, recently told investors that this is "the toughest inflationary environment we've seen in years." While the company's food and beverage costs rose 9 percent during the quarter, hourly wage costs also grew 9 percent as Darden tried to lure workers with higher pay.

The company said that it raised prices by 2 percent during the quarter. Those higher prices have not yet decreased consumer demand, said Rick Cardenas, Darden's president and chief operating officer.

Inflation jumped in December at its fastest year-over-year pace in nearly four decades, surging 7 percent and raising costs for consumers, offsetting recent wage gains and heightening pressure on President Joe Biden and the Federal Reserve to address what is increasingly Americans' central economic concern.

Prices have spiked during the recovery from the pandemic recession as Americans have ramped up spending on goods such as cars, furniture and appliances. Those increased purchases have clogged ports and warehouses and exacerbated supply shortages of semiconductors and other parts. Gas prices, while declining a bit from November to December, have surged in the past year, in part because Americans have driven more in recent months after having cut back on travel and commuting earlier in the pandemic.

The Labor Department reported Wednesday that excluding volatile food and gas prices, so-called core prices surged 0.6 percent from November to December, slightly more than the 0.5 percent increase from October to November. Measured year over year, core prices jumped 5.5 percent in December, the fastest such increase since 1991.

Rising prices have wiped out the healthy pay increases that many Americans have been receiving, making it harder for households, especially lower-income families, to afford basic expenses. Polls show that inflation has started displacing even the coronavirus as a public concern, making clear the political threat it poses to President Joe Biden and congressional Democrats.

A significant portion of consumer inflation is still being driven by pandemic-driven mismatches between demand and supply. Used car costs rose 3.5 percent from November to December and have soared more than 37 percent compared with a year ago. With new car production restrained by shortages of semiconductors, consumers have snapped up used cars, forcing up their costs.

Shortages at U.S. grocery stores have also grown more acute in recent weeks as new problems, like the Omicron variant and severe weather, have compounded the supply chain struggles and labor shortages that have plagued retailers since the coronavirus pandemic erupted.

On Tuesday, Chair Jerome Powell told Congress that the Federal Reserve is prepared to accelerate the interest rate hikes it plans to begin this year if it deems it necessary to curb high inflation. Fed officials have estimated that they will raise their benchmark short-term rate, now pegged near zero, three times this year. Many economists envision as many as four Fed rate hikes in 2022.

Those rate increases would likely increase borrowing costs for home and auto purchases as well as for business loans, potentially slowing the economy. The rate hikes also mark a sharp reversal in policy by Fed policymakers, who as recently as September had been split over whether to raise rates even once this year. The Fed is also rapidly ending its monthly bond purchases, which were intended to lower longer-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 about whether the Fed has acted too slowly to end its ultra-low-interest rate policies in the face of accelerating inflation—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 bottlenecks that have helped drive up the prices of goods wouldn't last nearly as long as they have. Once the supply chains were unsnarled, he said, prices would come back down.

Yet for now, the supply problems have persisted, and though there are signs that they are loosening in some industries, Powell acknowledged that progress has been limited. He noted that many cargo ships remain docked outside the port of Los Angeles and Long Beach, the nation's largest, waiting to unload.

With the Biden administration facing public discontent over the rise in inflation, President Joe Biden has said his administration's investments in ports, roads, bridges and other infrastructure would help ease inflation by loosening some snarled supply chains.

The Associated Press contributed to this report.