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Lower food-price inflation has translated into a decline in headline inflation

Figure 9. Inflation in dveloping countries has stabilized, due in part to a stabilization of food prices
Food and overall inflation, % change 3m/3m saar

Source: World Bank, ILO.

Inflation in developing countries has eased substantially since 2011 with prices now rising at a 5.4 percent annualized pace during the 3 months ending April 2012. The decline in total inflation mainly reflecting an easing in domestic food inflation in developing countries to below 5 percent in the three months to February 2012 (3m/3m saar) (figure 9). Food price inflation is now 0.4 percentage point below headline inflation. Food price inflation decelerated in South Asia, while in Europe and Central Asia consumer food prices have actually declined. In contrast, food price inflation accelerated in Sub-Saharan Africa and Latin America and the Caribbean, and the Middle East and North Africa.

Despite the welcome normalization of  domestic food price inflation, domestic food prices in developing countries remain 25 percent higher relative to non-food consumer prices than they were at the beginning of 2005. While incomes in developing countries have continued to rise, the sharp increase in food prices will have limited gains for many households, such as the urban poor, where food often represents more-than one-half of their total expenditures.