Another look at food inflation fears in EMs

The rise in global agricultural prices in recent months has sparked concerns about a surge in food inflation across the emerging world but we think that these fears are overdone. In any case, most central banks would probably look through higher food inflation in order to support economic recoveries. The key exceptions are those that are concerned about their credibility, such as Turkey.
Jason Tuvey Senior Emerging Markets Economist
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Turkey’s central bank took steps this week to tackle deposit dollarisation in the banking sector, although these efforts will fail to make headway in the absence of a stronger commitment to rein in high inflation. Meanwhile, Ukraine’s government still has work to do to secure the next tranche of its IMF loan, but the economy can muddle through without help from the Fund for some time. Finally, other developments this week suggest that Poland’s central bank may stick to its recent dovish rhetoric while Russia looks like it could accelerate the pace of monetary tightening.

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