Inflation concern will be an issue at next week’s meeting of the Group of Eight leading nations amid soaring oil and food prices, but leaders won’t advise any central bank on its interest rate policy, a German government official said Thursday.

Inflation is “increasingly becoming an issue that’s reason for concern,” said the official at a briefing on the G8 summit. But “there won’t be any recommendation on interest rates to any central bank,” said the official, who declined to be named. “I would regard this as wrong.”

The comments come after oil prices soared to over $145 a barrel and inflation rates in some countries have recently set record highs. Some analysts say the weak dollar is pushing up oil prices and inflation rates and a low interest rate in the U.S. is attracting investments to other countries, including the euro zone.

Monday, a statement from the Bank for International Settlements, known as the central bank of central banks, claimed that a bias toward monetary tightening was needed to fend off global price pressures.

The high-ranking German official said while it’s obvious that G8 leaders won’t be just “flipping the switch” and turning around oil prices, “a strong comment” from the G8 and an appeal for all to take responsibility “will be worth something.”

The impact that speculation plays in driving up oil prices on futures market is controversial among G8 leaders, but the official believes it plays a role.

More transparency on oil markets might help reduce speculation that plays a role in pushing up oil prices, he said.

Oil prices are driven up by high demand, but the lesson to be learned must also be that investment in refinery has to be increased and energy efficiency in oil consuming countries has to be improved.

The G8, which includes the Group of Seven leading industrial nations Canada, France, Germany, Italy, Japan, the U.K and the U.S. plus Russia, will meet in Hokkaido July 7-9.

Source: http://www.djnewswires.com/eu

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