CHICAGO (Reuters) - Fears that a move by the U.S. Federal Reserve to pump another $1 trillion into the ailing economy will trigger inflationary moves in grains and other commodities are premature, a World Bank official said on Thursday.
World Bank Managing Director Ngozi Okonjo-Iweala said the present crisis was dire enough to warrant the Fed’s surprise move, and until liquidity begins to flow adequately through the markets, inflation is a secondary concern.
“We need to solve the present crisis that we’re in,” said Okonjo-Iweala, who spoke in Washington D.C. as part of the Reuters Food and Agriculture Summit, held in Chicago and elsewhere.
“I‘m not saying there should be no concern. You need to keep a bit of an eye on that. But I don’t think we’re there yet,” she said. “Inflation worries are a little bit down the road.”
The Fed surprised markets on Wednesday, announcing it would buy up to $300 billion of longer-term U.S. government debt over the next six months and expand its existing program to buy mortgage-related securities by another $850 billion to $1.45 trillion this year.
The dollar plunged in response, posting its biggest one-day loss against a basket of currencies since 1985 on Wednesday and extending declines on Thursday.
U.S. commodities responded by surging in value. Futures prices for soybeans, corn and wheat all were rallying Thursday morning, as were coffee, sugar and cocoa values. Gold prices for April delivery jumped more than 6 percent, U.S. crude oil futures rose above $50 a barrel, and copper futures were at a four-month high.
The Fed move was criticized by many analysts who said the actions were sure to lead to an inflationary spike that would be painful to consumers and corporations alike.
But Okonjo-Iweala said the focus now should be on trying to get consumption up in part through increased liquidity. Once the housing crisis cools and banks loosen their grip on credit, then fears of inflation can be addressed.
“The Fed is trying to do all it can to help,” she said.
Reporting by Carey Gillam, editing by Matthew Lewis