June 15 (Bloomberg) -- Finance ministers from the Group of Eight nations said surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy.
``The predominant concern is the inflationary effect that oil in particular and also food prices are having,'' U.K. Chancellor of the Exchequer Alistair Darling said yesterday after G-8 officials ended talks in Osaka, Japan. Deputy German Finance Minister Thomas Mirow said oil's rise to a record means ``an enormous withdrawal of purchasing power.''
Inflation is accelerating after the price of oil reached an unprecedented $139.12 a barrel on June 6 and food costs from rice to soybeans set records this year. Central banks are already shifting toward tighter monetary policy even as worldwide economic growth cools.
Let's see if all that talk translates into action on the part of Bernanke and Paulson. After all, the US is the G8 country with the lowest rates. The pressure is on after having gone "all in" to rescue the banking sector and in the process giving us (and the world) $135 oil.
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