The protests began when shopkeepers refused to accept some bank notes, over fear of counterfeiting. Tens of thousands of people took to the streets on Monday, and troops fired into the crowds.
The Times reports that soaring inflation is taking place against the backdrop of a civil war that has raged since 1991, when the government collapsed and a bloody power struggle began.
A sharp rise in counterfeit currency over the last year, and the rise in global food prices, has fed skyrocketing inflation. The devaluing of Somalia's currency, the shilling, has exacerbated the problem.
Prices for basic cereals such as rice and sorghum are up between 100 percent and 400 percent from last year; the price of a sack of rice has risen from US$32 to US$52 in just one month. Adding to the problem, Somalia's local crops were devastated by drought and flooding. Somalia imports 60 percent of its grain.
The Agence France-Presse reported today that Islamist militants are urging shopkeepers to accept Somali shillings instead of US dollars to help curb inflation. They also said they would "punish" those who refuse to comply.
Inflation began rising early last year when Somali government and Ethiopian forces began a push to drive out Islamic militants.