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The World Bank is blaming a rise in global %Commodity prices for driving inflation higher and making it difficult for central banks to lower interest rates and loosen monetary policy.

In a new report, the World Bank notes that commodity prices ranging from crude oil to gold are considerably higher than their pre-pandemic levels, exerting upward pressure on inflation.

Commodity prices had fallen as much as 40% between June 2022 and June 2023, driving a reduction of more than two percentage points in global inflation.

However, prices for commodities have been steadily rising since last summer, leading to an uptick in inflation rates and throwing plans by central banks to lower interest rates into turmoil.

The World Bank forecasts that its commodity price index will remain about 38% above the 2015-19 average through 2025 as inflation stays above targets across many global economies.

The bank blames the rise in commodity prices on heightened geopolitical risks, tight supplies for industrial commodities, and higher demand for base metals bolstered by the clean-energy transition.

A big risk to the inflation outlook is the conflict in the Middle East, which could lead to a further increase in global inflation and further delay monetary easing among central banks.

Supply disruptions could see the average price for Brent crude oil, the international standard, reach $92 U.S. per barrel this year, while a more severe disruption could see prices surpass $100 U.S. a barrel, warns the bank.

At the same time, food prices are expected to fall this year and next, partly driven by higher supplies and moderating El Nino weather conditions, said the World Bank.

Metals such as copper and aluminum, however, should see their prices rise, bolstered by demand for electricity-grid infrastructure, electric vehicles, and solar panels.

Economists now expect the U.S. Federal Reserve to start cutting interest rates in September of this year, at the earliest. Some economists see rate cuts being pushed out to 2025.

Based in Washington, D.C., the World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries.