European Central Bank warns on food prices

Rising prices for food, energy and other commodities could drive up consumer prices in the euro zone and there is “significant uncertainty” as to whether food supply will be able to meet demand in the long run, the European Central Bank said yesterday, Wall Street Journal informs. The ECB said it in its monthly bulletin that it is “essential” to monitor the development and drivers of food commodity prices, which have risen significantly. Wheat prices were 91 per cent higher at the end of 2010 than at the beginning of the year, while prices for maize, soybeans and sugar were also sharply higher. “While there is scope for supply-side effects to match the rise in demand, there remains significant uncertainty about the extent and pace of the ability of supply to meet the expected rise in demand and thereby help to limit the rise in food prices”, shows the report. The ECB observed that “recent cuts in production estimates and signs of record imports by China put upward pressure on (maize) prices,” which were 57 per cent higher at the end of 2010 than at the beginning. Crude oil prices also surged about 20 per cent over the past 12 months and the ECB reiterated that the supply-side response to higher prices and demand has been “muted.”

The ECB also warned that “survey indicators up to December signal rising price pressures” in industrial producer prices, pointing to recent purchasing managers’ surveys of input and output prices. The warning comes after rising energy prices pushed euro-zone inflation above the ECB’s 2 per cent ceiling in December 2010, when consumer prices were up 2.2 per cent from December 2009.

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