Cost of food threat to inflation

December, 2006 – According
to the Financial Post, a Merrill Lynch economist believes groceries
could soon replace energy as the largest source of inflationary
pressure in the US. His report explains that the reason food is such a
big concern is that is has a 14 per cent rating in the US consumer
price index – a key measure of inflation –compared to 8.5 per cent for
energy …

December, 2006 – According
to the Financial Post, a Merrill Lynch economist believes groceries
could soon replace energy as the largest source of inflationary
pressure in the US. His report explains that the reason food is such a
big concern is that is has a 14 per cent rating in the US consumer
price index – a key measure of inflation –compared to 8.5 per cent for
energy; only
housing has a larger weighting in the index. As agriculture prices
continue to rise –driven by the demand for biofuels –this could boost
inflation by half a percentage point over the next two years, pushing
the rate beyond the US Federal Reserve’s “comfort zone.”