Inexpensive goods can still be produced, if capacity expands without generating price pressures. But the demand for oil, steel, minerals, etc., recorded strong increases, which pushed prices up. The supply has not responded to demand with the same vigor. 5  The empirical literature has been critical in this point, but a recent work by Auer and Fischer (2008) shows that the producer price index of the United States was two percentage points less due to cheap imports from developing economies. 4  BIS Review 124/2008  A case worth highlighting is foods. Some of them absorbed the demand increase due to economic growth with supply increases, but then a new source of demand appeared: bio fuels, which have further strained the prices of grains. Another factor that, according to some analysts, has been important in price hikes has been investor involvement, demanding commodities as another asset in their portfolios. But if investors were buying to resell with a margin, this would translate into an increase in inventories, which it has not. Accordingly, the purchases of futures by some agents go hand in hand with the sale of futures by others, and are normally the counterpart of hedging operations. On the other hand, while investors’ positions have risen substantially in the commodities markets, they still share but a small fraction of the market.
(1) Latin America: Brazil, Mexico, Chile, Colombia y Peru. (2) Asia EM: China, India, Indonesia, South Korea, Malaysia, Singapore, Taiwan and Thailand. (3) Europe EM: Czech Republic, Hungary, Poland, Russia andTurkey. (4) G3: US, Euro area and Japan. Source: CEIC Data. BIS Review 124/2008  13  Figure 11 Inflation forecast for 2008 (*) (percentage)  9 8 7 6 5 4 3 2 1 0  G3  Latin America  Emerging Asia Emerging Europe  (*) Geometric average of inflation forecast. For Latin America and Russia, end of the year inflation data. Source: Consensus Forecasts. Figure 12 Inflation forecast for 2009 (*) (percentage)  7 6 5 4 3 2 1 0  G3  Latin America  Emerging Asia  Emerging Europe  (*) Geometric average of inflation forecast. For Latin America and Russia, end of the year inflation data. Source: Consensus Forecasts. 14  BIS Review 124/2008  Figure 13 Monetary policy rates in the world (percentage) 8,75  4,50  8,50  4,25  8,25  4,00  8,00  3,75  7,75  3,50  7,50  3,25  7,25 Jun.07  Sep.07  Dec.07  Mar.08  3,00 Sep.08  Jun.08  Developing (1)  Developed (2)  (1) Average of reference rates for: Brazil, Colombia, Korea, Chile, China, Hungary, India, Israel, Mexico, Peru, Poland, Czech Republic, South Africa and Turkey. (2) Average of reference rates for: Canada, US, Japan, Norway, UK, Switzerland, Sweden, Euro area. Source: Central Bank of Chile and Bloomberg.