There’s no doubt inflation is rising and that it will cause pain for consumers as they pay more for food, gasoline and heating oil, if that’s how they heat their homes. However, this situation is unlikely to result in the spiralling inflation of the 1970s and 1980s, as central banks are determined not to allow that to happen again.

In January, certain commodities prices in U.S. dollars had risen vs a year ago: canola was up by 55%; wheat, by 53%; barley, by 31%; cattle, by 25%; and hogs, by 18%.

Economists with National Bank Financial Ltd. in Montreal expect food prices in the Canadian consumer price index — 2.2% higher in January vs year-earlier levels — to be running about 4% above year-earlier levels by the summer.

At the same time, oil prices have been pushing toward US$100 a barrel in the wake of the social and political turmoil in Africa and the Middle East. If the turmoil continues and/or erupts elsewhere in oil-producing countries, oil prices could go much higher.

Inflation is already a problem in emerging Asia and Latin America, where food consumes a much larger share of household budgets and, thus, has a much bigger impact on measures of inflation.

Furthermore, these regions had been only briefly affected by the global financial crisis and quickly returned to strong economic growth, so unemployment is generally low — leading to the possibility of workers demanding wage increases, which will push up consumer prices further and result in demands for even higher wages.

Authorities in countries such as China are trying to slow growth sufficiently to dampen inflationary pressures while still keeping their economies growing at a healthy pace. But these nations walk a thin line, given the percentage of household budgets that food consumes. In addition, these countries could also face social unrest if inflation gets out of control.

In contrast, central banks in the industrialized world have time to deal with the inflation issue because unemployment is high and, as a result, workers aren’t in a position to demand — and receive — wage increases.

Nevertheless, the U.S. Federal Reserve Board, the European Central Bank and the Bank of Canada can’t ignore rising inflation.

This is particularly the case for the ECB, whose mandate focuses solely on inflation, which may lead it to push up interest rates quickly.

The Fed’s and the BofC’s mandates include economic growth as well as inflation, so they can justify a more gradual approach — a good thing in the case of the U.S., which is not yet on a self-sustaining path of growth. IE