I wouldn't exactly call it breaking news, but it was good to see consensus among the G8 that inflationary pressures were now the biggest threat to economic growth worldwide. The credit crisis certainly has worked to send many of the largest economies into a tailspin, the US most notably, but the persisting pressure of higher oil and commodity prices threatens to keep these same economies from any sort of near-future recovery.
Oil hit $139.12 per barrel on June 6, 2008; an all-time high. Commodity prices, like wheat, for example, have seen prices double in the past year. On a personal note, I can confirm that I've seen the price of whole wheat flour literally double in a matter of weeks at my local supermarket. While commodity prices represent a relatively small proportion of household spending (food, in general, may only see single digit-increases), the combination of these rising prices with declining home equity and accelerating unemployment figures paints a very black picture for the future.
It's a positive thing to note the G8's consensus, but worrying still is what actions will result from that consensus. To slow inflation, central banks will begin to raise interest rates. While many would tend to agree that this is long-overdue, the current state of the world economy as generally weak and slowing, will likely mean that in doing so, the higher cost of capital will only affirm the recessionary tendencies and result in a very, very slow recovery.
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