Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months.
Tai Hui said commodity price increases were much less dramatic in late 2009 and January 2010, so they do not provide a satisfactory explanation for the recent widening of the trade deficit.
Commodity prices are also off their peaks, though those most important for Australia remain at very high levels, and the terms of trade have regained their peak of two years ago.
If, in addition, the Bank of Japan and European Central Bank stopped the QE, the commodity prices could tumble further, so that what has happened after the massive QE is the deflation.
For months, nearly all-basic commodities have been only sporadically available in most locations, and basic commodity prices in December 2016 were on average 22 per cent higher than before the crisis, reports OCHA.
This has allowed the HIPC countries to increase their social expenditure, but this trend is being reversed as developing country exports and commodity prices have fallen starkly as a consequence of the current crisis.
In the second place, it must be borne in mind that, despite the fluctuations in the prices of commodities, the average price of every commodity, the proportion in which it exchanges for other commodities, is determined by its cost of production.
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