Tags: Barrons | Surging | Commodities | Global | Economy

Barron’s: Surging Commodities Threaten Global Economy

By    |   Thursday, 10 Feb 2011 09:27 AM

Commodity prices are soaring, with some exceeding their record peaks of 2008. That’s bad news for the global economy, just like it was in 2008, experts tell Barron’s.

The Continuous Commodity Index, an equal-weighted gauge of prices, has reached a new high, according to Bank of America.

Energy, grains and metals all have touched historic peaks, even though crude oil hasn’t breached $100 a barrel, and U.S. gasoline prices haven’t exceeded $4 a gallon, as they did in 2008.

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Corn Reserves at 15-Year Low
The surge in commodities puts pressure on central banks to raise interest rates to avoid a run-up in inflation. Already the People's Bank of China, the Reserve Bank of India, the Bank of Thailand and the Reserve Bank of Australia have hiked rates.

If others follow suit, economies across the world may stagnate.

"These factors are a threat to global activity, dampening the medium-term growth outlook,” writes Melissa Kidd of Lombard Street Research in London, Barron’s reports.

Some economists, however, say rising inflation in emerging markets makes interest rate increases a must there.

“Everybody (in emerging markets) is going to need to tighten monetary policy, reduce budgetary stimulus and continue with the process of structural reforms,” John Lipsky, deputy managing director of the International Monetary Fund, told The Wall Street Journal.

Given their strong growth, these economies can withstand rate increases, economists say.

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Commodity prices are soaring, with some exceeding their record peaks of 2008. That s bad news for the global economy, just like it was in 2008, experts tell Barron s. The Continuous Commodity Index, an equal-weighted gauge of prices, has reached a new high, according to...
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2011-27-10
Thursday, 10 Feb 2011 09:27 AM
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