The unintended consequences of the commodities pricing surge

ON ASSET ALLOCATION

Smith & Williamson's Philip Lawlor says the increase in commodity prices will hit both emerging and developed economies.

The recent surge in commodity prices is teaching us all a lesson in the law of unintended consequences. Not only have rising commodity prices contributed to the social unrest that has erupted in Tunisia and Egypt, it has forced  emerging economies to tighten monetary policy – risking their growth trajectory. Of the G7 economies, the UK has been the most adversely impacted by rising import costs. With persistently high inflation, markets are now discounting a tightening in UK interest rates starting this summer. We are concerned this would ultimately prove to be a policy mistake as the...