WASHINGTON (Thomson Financial) - The global economy is facing 'agri-flation,' a period of rising food prices 'that may be more sustained than we would like' and could last several years, Dallas Federal Reserve Bank President Richard Fisher said today.
While biofuel production is playing a part in higher global demand for agricultural products, Fisher said it's the 'evolving eating habits' of billions of people in emerging economies 'who are becoming increasingly wealthy' that are the principal factor in higher food prices.
The Dallas Fed president was speaking to the Economics Club of Charlotte, North Carolina. He made a point of not addressing immediate monetary policy concerns in the text released to reporters.
Fisher said it may take several years 'before technology and investment can respond with sufficient supplies to put food prices back on their long-run course' of gradual decline.
He said the current increase in energy prices, on the other hand, does not represent the same inflationary threat that the energy supply shocks of the past did. The reason is that this round of higher prices is based not on a sudden supply shortage but on increased demand created by a 'productivity shock'.
Oil prices have been rising for four years without any apparent penalty in US or global economic growth. Fisher sees a 'virtuous cycle' in which the price effect of demand for oil in fast-growing emerging economies is offset by lower import prices and productivity gains in the US. dennis.moore@thomson.com dem/wash/ejp COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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