OSAKA–Finance ministers from Group of Eight nations huddled Friday to discuss ways to tackle growing economic uncertainties stemming from soaring oil and food prices, along with other global challenges.
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Sky-high crude oil and grain prices will top the agenda at the weekend talks ahead of the G-8 summit in Hokkaido July 7 to 9. Rising prices threaten to fuel inflation and hamper economic growth, two risks that require conflicting policy responses
Another pending issue is the weak dollar, which has contributed to higher international commodity prices worldwide. It will likely be discussed despite the absence of central bankers responsible for monetary policies. The finance ministers are also expected to discuss climate change and African development
Finance Minister Fukushiro Nukaga, who chairs the meeting, met U.S. Treasury Secretary Henry Paulson on Friday
On Monday, Paulson unsettled financial markets when he said he would not rule out the possibility of intervening in foreign exchange markets to prop up the greenback
Nukaga said Friday that he and Paulson had agreed to work together to deal with risks of global inflation. But he refused to comment on whether propping up the U.S. currency had been part of their talks
Financial authorities fear that soaring oil and food prices will build inflationary pressure even as the world economy is still grappling with the fallout from the U.S. subprime mortgage crisis
Nukaga has said that if expectations for inflation rise, setting macroeconomic policies will become more difficult for countries
“The world economy, accustomed to low inflation and stable growth for more than 10 years, is facing a new challenge in rising prices and (slowing economy),” he told a news conference June 6
The dollar has lost value against the euro and other key currencies after a series of U.S. interest-rate cuts that began in September aimed at alleviating the impact of the subprime loan debacle
In the United States, the weak dollar has raised prices of imported goods. Internationally, it has led investors to shift cash into oil and grain markets, which are also traded in the U.S. currency
On the New York market, the price for futures of West Texas Intermediate, a benchmark U.S. crude oil, climbed to a record $139.12 per barrel at one point on June 6
The price of oil has nearly doubled in the past year alone
International prices of primary grains, such as wheat, soybean and corn, have also skyrocketed, leading to riots in developing countries
On Friday, the G-8 finance ministers dined with finance officials from Australia, Thailand, Brazil, China, South Korea and South Africa to discuss economic conditions in their countries.
Filed by Marina Garbutt under Global Financial Crises, Macroeconomic Policy