Washington - The International Monetary Fund on Thursday increased its inflation predictions as food and fuel prices continue to surge. Reining in inflation will complicate policymakers' ability to respond to a lagging economy, especially in emerging and developing economies that are experiencing the largest rates of inflation since the beginning of the decade.
Food and fuel expenditures take up a larger share of the economy in those countries, where headline inflation rose to 8.6 per cent in May over the year-earlier period. Core inflation - which excludes fuel and food increases - rose 4.2 per cent.
In advanced economies headline inflation rose 3.5 per cent in May over the year-earlier period, and core inflation grew 1.8 per cent.
Though inflation will be countered by slower demand in advanced economies by 2009, developing countries will continue to be impacted for some time, the IMF said. It increased its inflation forecast for those nations by 1.5 percentage points to 9.1 per cent in 2008 and 7.4 per cent in 2009.
Price pressures are likely to continue in the near future as high demand persists without a significant increase in production.
