Dramatic increases in international food and energy prices and sustained strong economic growth have fueled inflationary pressures in many countries around the world. Since commodity prices began rising in 2003, the median inflation rate has increased significantly among developing countries, with a particularly sharp jump observed during the course of 2007 as food prices surged. Indeed several countries have seen their headline inflation accelerate to the fastest pace in many years. In countries with currencies pegged to the U.S. dollar the depreciation of the U.S. dollar resulted in significant increases in prices of imported good. For a large number of countries however the appreciation of their currencies vis-à-vis the U.S. dollar means that the magnitude of the increase in international commodity prices, many of which are traded in U.S. dollars, is smaller. Inflation rates exceed central bank targets in many countries and are likely to remain above these targets in the short-term, as central banks tighten monetary policies only modestly.
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