The “Group of Seven” central bankers, who control the money spigots in two-thirds of the world’s economy, huddled with their colleagues from China and Russia behind closed doors in Basel, Switzerland this week, haunted by the “Crude Oil Vigilantes” who threaten to unravel G-7 schemes to rescue troubled global banks. Yesterday, the price of West Texas Sweet traded as high as $124 /barrel, doubling from a year ago and guiding Chicago Corn futures to all-time highs.
European Central Bank chief, Jean Trichet, chaired a meeting of central bankers from the “Group of 10” industrialized nations on May 5th, and acknowledged that:
Inflation risks are significant under the influence of oil and energy price increases, commodity price increases more generally, and food and agricultural products. This is perceived in all economies without exception. This is no time for complacency for central banks in any respect.
In China, food prices rose 21% in the first quarter of 2008 from a year earlier. The Euro zone’s figures showed that food prices surged 6.1% in March alone, while prices of basic staples such as bread, milk and cheese grew even faster. In the US, bread prices have jumped 12%, milk 20% and flour 32 percent. A dozen eggs are 30% more expensive and tomatoes and bananas are up 13 percent.
“Food pressures are one of the most serious problems that we have to face now,” added Poland’s central bank chief, Slawomir Skrzypek. “But central banks cannot use monetary policy tools to manage this problem,” he said. Worldwide, food prices in March were 57% higher than a year earlier, according to the United Nations. The price of rice is up 120% and wheat has climbed 65%, triggering violent protests across Asia and the Middle East following reports of deaths from starvation.
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