2017.01.1206:34:00UTC+00Global Reflation Series: Food Prices rise for First Time in Four Years

If you were thinking that the recent rise in crude oil prices coupled with higher metal price could trigger a spike in inflation leading to big selloffs in the bond market and the central banks hurrying to reverse their record easing, add food inflation to your worries.

According to United Nations’ Food and Agricultural organization, thanks to higher prices of vegetable oil, sugar and dairy, food prices rose for the first time in 2016 in four years. In December 2016 sugar prices were up 26 percent, Dairy prices were up 29 percent and vegetable oil prices were up 30 percent from a year ago. United Nations’ FAO Food Price Index, which is a measure of the monthly change in international prices of a basket of food commodities and consists of the average of five commodity group price indices, were up 12 percent from a year ago.

While the above three components saw a sharp rise, prices remained moderate for meat and cereals. If these components rise in 2017, the inflation would definitely be higher than projected by most central banks.