Surging oil and food prices have fueled inflation across the globe and at the same time weak economic recovery is posing a quandary for policy makers.

While the world economy is coming out of the financial and economic crisis, it is facing other risks and turbulent changes. These include high and volatile food prices, high oil prices, and political unrest across the Arab world, frequent natural disasters and rising inflationary pressure in emerging markets and sovereign debt issues in Europe. As domestic markets are coupled closely with the world economy, distress in the global arena can now emerge and spread to domestic markets much faster than before.

Data on food prices across the globe shows how rising food prices are a global problem. Food inflation in China, Brazil and Vietnam is in double-digit and countries like Algeria are concerned with food riots. Global food prices have continued to rise during the last two months and reached a nominal all-time high. Now the spike in oil prices could push food costs even higher. The United Nation's Food and Agriculture Organization (FAO) food price index which measures the prices of basket of food commodities increased for the last eight months in a row and is now at the highest level since it was created in 1990. Food prices hit a record high in March 2011, surpassing levels in 2008 that sparked riots in countries from Egypt to Haiti. The volatile oil prices come against a backdrop of changing demographics and consumption patterns, ever growing demand for food worldwide and increasingly tight supplies of major commodities.

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