Recent Inflationary Trends in World Commodities Markets

May 1, 2008

Preview Citation

Format: Chicago

Noureddine Krichene. Recent Inflationary Trends in World Commodities Markets, (USA: International Monetary Fund, 2008) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Expansionary monetary policies in key industrial countries and sharply depreciating U.S. dollar exchange rate sent commodities prices soaring at unprecedented rates during 2003-2007. Food prices rose to alarming levels threatening malnutrition and food riots. In contrast, consumer price indices, a leading indicator for monetary policy, were showing almost no inflation and posed a price puzzle insofar their evolution was not responsive to record low interest rates, double digit commodities inflation, and sharp exchange rate depreciation. Commodities prices were shown to be driven by one common trend, identified as a monetary shock. Policy makers may have to face a policy dilemma: maintain monetary policy stance with accelerating commodities price inflation, subsequent world recession, and financial disorder; or tighten monetary policy with subsequent world recession followed by recovery and financial and price stability.

Subject: Commodity price indexes, Commodity prices, Inflation, Oil prices, Price indexes

Keywords: Commodities price, Federal funds rate, Monetary policy, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/130
Stock No:

WPIEA2008130
ISBN:

9781451869897
ISSN:

1018-5941

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