World commodity prices have recently returned to record highs and are expected to remain high for the remainder of 2011. Of particular relevance to inflation in Mozambique is the outlook for global food prices, as the country is highly dependent on imports of food, which has a heavy weighting in the consumer price basket. We expect global food prices to rise by a very rapid 19.3% in 2011 and consequently expect inflation in 2011 to average 7.5%. World commodity prices are expected to ease slightly in 2012 as monetary policy tightens worldwide, encouraging a withdrawal of investment from commodities (speculation having partly driven the rapid rise in prices in 2010). However, the government is likely to use this opportunity to finally withdraw fiscally unsustainable food price subsidies, so the impact on inflation will be broadly neutral. Consequently, we expect inflation to ease only slightly in 2012, averaging 5%.