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• Drought in large parts of the United States is pushing up world food prices
• Emerging markets ease monetary policy to stimulate growth
• The debt crisis in the eurozone remains a major source of uncertainty 

The severe drought affecting much of the United States is having a damaging impact on crops. The United States Agricultural Department (USDA) has downgraded its forecast for maize output by 12 per cent. Futures prices for maize have jumped by over 50 per cent since mid-June. In addition, soybean prices have increased by about 40 per cent this year, while the prices for wheat and maize are up by about 20 per cent.

 

In response to slowing domestic growth and heightened uncertainty over the global outlook, monetary authorities in emerging economies are increasingly moving towards a more supportive policy stance. In July, the central banks in Brazil, China, Colombia, the Philippines, the Republic of Korea, South Africa and Taiwan Province of China cut their benchmark interest rates. In doing so, authorities are trying to stimulate domestic demand in the face of a sharper-than-expected slowdown in recent quarters.