Higher Energy Costs Push Up Inflationary Pressures
International commodity prices have risen in tandem with the global economic recovery and on the back of supply disruptions, leading to stronger inflationary pressures around the world. In the G3, the headline inflation rate increased to 1.9% in Q1 2011, compared with a quarterly average of 1.3% in 2010, a rise that can largely be attributed to higher oil prices. In contrast, core inflation rates have stayed subdued. There is still significant spare capacity available and unemployment rates remain above their historical averages.
In Asia ex-Japan, CPI inflation picked up sharply in 2010, with food and oil prices being the main contributors owing to their substantial weights in CPI baskets. During the early months of 2011, headline inflation in this region rose further as food and energy costs escalated. Core inflation was also on the rise as domestic resource constraints became more binding amidst robust economic growth.
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