The price increases limit the scope for further expansion of economic policy. There is a risk that inflation expectations will be pushed upwards, triggering a wage and price spiral. Needless to say, the impact of higher food prices is most severe in the poor countries, and the issue is rapidly climbing to the top of the international agenda.
I have already highlighted the very impressive growth in aggregate bank lending since the start of the millennium. However, most of this lending is extended to the non traded goods sectors, especially trade, construction and telecommunications, and to the household sector.