The rise in global food prices prevents to stop the economic decline and exacerbate the crisis

2020-10-22 12:09:12
Machine translation
The rise in global food prices prevents to stop the economic decline and exacerbate the crisis

Rise in price of products deals a double blow to developing countries: millions of people are starving, and Central banks can't stop the world's largest economic crisis of the last decades, reports UkrAgroConsult citing Bloomberg.

 

Since may, food prices increased by 8%, because it is hampering supply, and drought reduces yields. Through high inflation, many governments weaken monetary incentives, although their economies, it is extremely necessary.

 

First, the Central Banks thought that the pandemic a sharp fall in inflation will allow for expansionary policies, but this did not happen. The rising cost of living intensifies the excitement among people who suffer from diseases and unemployment.

 

In Sudan, after protests caused by the increase of annual inflation up to 212%, the government was forced to impose a curfew. In Pakistan, thousands of civil servants picketing in the capital demanding higher wages.

 

In poor countries most of the income people spend on food, so their price has a major impact on inflation indices. The Central banks of some countries through a sharp jump in food prices lost the primary tool to combat the economic crisis – the possibility of changes in interest rates.

 

Despite the largest in a decade, the economic crisis, the Central Bank of India left interest rates unchanged, while annual inflation in September accelerated to 7.3%, the highest January figure. Almost half of the inflation basket India are the prices of the products compared to the 2019 rose 9.7%.

 

the Mexican Government also refuses to reduce interest rates, although the economy is suffering the most since the 1930s crisis.

 

the increase in food prices increases inflation in the markets of other countries, including Brazil, Russia and South Africa.

 

Even if the price increase will be temporary, Central banks fear the "secondary effects" when the rapid growth of prices increases inflation expectations, which leads to a new jump in prices.

 

According to Bloomberg, the yield on government bonds of countries that are developing, for the last 4 months exceeded 4%. This suggests that investors do not expect a significant jump of inflation.

 

Individual countries, in particular Nigeria and Vietnam, despite inflationary pressures, decided to cut interest rates to support the economy. High food prices will slow the economic recovery and hurt the poor citizens who will be forced to give up other goods.

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