The world's most powerful economies will warn tomorrow that the spiralling cost of fuel and food pose a threat to the low inflation and strong growth enjoyed by the west for the past decade and a half.
A draft of the communique from G8 finance ministers and central bank governors meeting in Osaka, Japan, will recognize that the boom in commodity prices in recent years now pose a serious inflationary threat, according to a report by the Reuters news agency.
"For a long time the world economy enjoyed a combination of robust growth and low inflation, but it now faces headwinds," the G8 draft says. "Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide ... (and) may increase global inflationary pressures."
Amid concerns that speculators have been driving up the price of crude, the G8 is to ask the International Monetary Fund to look into movements on the commodity exchanges. The price of crude is six times higher than it was in 2002 and reached a record of just under $140 a barrel last week.
G8 ministers believe higher inflation caused by rising commodity prices limits the ability of policy makers to cut interest rates in the face of the global credit crunch. The UK and the US have both released official figures this week showing mounting price pressures.
Giulio Tremonti, Italy's economy minister said today that oil prices are being driven more by speculation than by supply and demand. "My judgment is that the phenomena of demand and supply can cause price rises, but not so violent and sudden," Tremonti said in Osaka.
"This leads one to think that the causes (of rising prices) are not structural, but that on top of the barrel (of oil) there is a magnum of speculative champagne."
Tremonti will propose to his G8 colleagues that there should be an increase in the amount of deposit required to trade in oil futures, as a way of curbing speculation.
"A certain amount of ... speculation on the markets is inevitable, but what we see now is out of proportion, there are more contracts than barrels," he said.
Japan earthquake
Small trucks drive down a road with the Fukushima Daiichi plant in the background Insider's view. 'I was at Japan's Fukushima nuclear plant when the quake ...
A draft of the communique from G8 finance ministers and central bank governors meeting in Osaka, Japan, will recognize that the boom in commodity prices in recent years now pose a serious inflationary threat, according to a report by the Reuters news agency.
"For a long time the world economy enjoyed a combination of robust growth and low inflation, but it now faces headwinds," the G8 draft says. "Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide ... (and) may increase global inflationary pressures."
Amid concerns that speculators have been driving up the price of crude, the G8 is to ask the International Monetary Fund to look into movements on the commodity exchanges. The price of crude is six times higher than it was in 2002 and reached a record of just under $140 a barrel last week.
G8 ministers believe higher inflation caused by rising commodity prices limits the ability of policy makers to cut interest rates in the face of the global credit crunch. The UK and the US have both released official figures this week showing mounting price pressures.
Giulio Tremonti, Italy's economy minister said today that oil prices are being driven more by speculation than by supply and demand. "My judgment is that the phenomena of demand and supply can cause price rises, but not so violent and sudden," Tremonti said in Osaka.
"This leads one to think that the causes (of rising prices) are not structural, but that on top of the barrel (of oil) there is a magnum of speculative champagne."
Tremonti will propose to his G8 colleagues that there should be an increase in the amount of deposit required to trade in oil futures, as a way of curbing speculation.
"A certain amount of ... speculation on the markets is inevitable, but what we see now is out of proportion, there are more contracts than barrels," he said.
Japan earthquake
Small trucks drive down a road with the Fukushima Daiichi plant in the background Insider's view. 'I was at Japan's Fukushima nuclear plant when the quake ...
