BCA had a special on inflation. Economics has not found out if the current situation of excessive money growth, high increase in commodity prices and high output gap should lead to more inflation.
The relationship between money growth and inflation is away for more than twenty years in the U.S. iso the Fed gives little attention to money growth. The velocity of money has been erratic in yhat period, unpredictable. In the US the correlation between money groth and credit growth not very high (in Europe it was higher, maybe because the short rate of the ECB was less below normal).
Central banks will only wake up when you see strong credit growth (at a certain moment there will be a sudden acceleration when the trust of business is big enough to spend: when they see the competition is brave, fiscal help will disappear, they will follow soon). Then the FED will hike rates, presumably late.
The rise of food prices will lead to only very small rise of the CPI in the US. A 10% rise of commodity prices for food will rise to 4.3% rise of producer prices of food products and they will charge only 1.8% higher prices in the end products of food in the US and that wil lead to 0.7% higher food prices in the supermarkets and that will lead to only a 0.1% higher CPI in the US.
The output gap is still huge in the West and because of that the rise of wages will remain very low, people (and unions) don't dare to ask for higher wages because of higher food and oil prices (unlike in the seventies). That is why you will not see stagflation. The underlying rise of productivity is very high and that also will cause only limited inflation. Because the the rise of unit labour costs lags inflation, one should not be that assured from low unit labour cost growth keeping inflation down.
BCA concludes that inflation in the West will not rise much, especially when core inflation will remain between 1 and 2%, as probably will be the case in the US for the time being.
In emerging markets the inflaton story is completely different. There they have a real inflation problem. High monetary growth is leading to higher inflation (unstoppable as long as they peg their currencies to the dollar and so cause a tremendous growth of foreign currency reserves). The food prices are a big problem because they have a much higher weight in their CPI's and commodity prices are translated much earlier in higher CPI because they have more basic food (not the luxury deserts with lots of marketing costs of the West etc). Because in emerging markets the output gap often is negative you will see high wage demands because of the high food prices.
In the end that will lead to higher export prices, even higher commodity prices and higher inflation everywhere in the world.
My opinion: for the time being inflation will remain moderate, because the rise of productivity will remian high, especuially in emerging markets and in the West the rise of wages will remian limited. But there are several mechanisms that can lead to sudden rises of inflation. Until certain levels monetary growth will not lead to inflation, the big output gaps also help and that will keep infation because of higher commodity prices limited. But when you surpass the safe money growth levels,the output gap in the world is closed (because of emerging markets) inflation kan rise a lot. Suddenly wages will rise to compensate higher gasoline and food prices, credit growth can explode suddenly. The stronger and stronger divide between income growth of the upper class versus the middle class in the West can force highly inflationary wage growth of the upperclass (especially when after that the middleclass doesnt take it any longer and also forces higher wages).