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26 January 2012 | Adam Leach
The International Monetary Fund (IMF) has
predicted that commodity prices, excluding oil, will drop by 14 per cent over
the course of this year.
The World Economic Outlook Update,
published on Tuesday, proposed “improving supply conditions”, such as greater
availability, accompanied by a “slowing” of global demand, would force the
average market prices paid for the raw materials to drop in all categories
apart from oil.
As a result of the reduced commodity
prices, the IMF predicts global consumer price inflation (CPI) will ease. The
report said: “In advanced economies, ample economic slack and well-anchored
inflation expectations will keep inflation pressures subdued, as the effects of
last year’s higher commodity prices wane.”
The report predicted inflation would fall
to 1.5 per cent compared with a 2011 peak of 2.75 per cent. It also expected
the ease in inflation to apply to emerging and developing economies as a result
of food prices easing and a steadying in growth.
When it comes to oil prices, the report warned
of rising geopolitical risks and predicted that although global activity was
expected to fall, there would only be a marginal ease in prices. The IMF warned
increased fear or an actual disruption
to Iranian oil supply
could have large repercussions.
The report said: “The oil market impact of
intensified concerns about an Iran-related oil supply shock (or an actual
disruption) would be large, given limited inventory and spare capacity buffers,
as well as the still-tight physical market conditions expected throughout 2012.
