Global Virus: Surge in inflation causes worry

Press Trust of India News (PTI) writes

India is not only the country where rising prices of essential commodities is giving consumers and policy makers sleepless nights. The surge in inflation is a major cause of concern even for giants like the US and China and rich nation like Britain and Singapore. Inflation based on wholesale prices in India has been hovering around 6-6.5% for past few weeks, well above the reserve Bank’s target of 5-5.5% for this fiscal. This is despite various efforts by the government and the central bank to rein it back within the limit. Even measures like repeated hike in interest rates and ban on future trading of certain commodities like wheat and rice have failed to yield the desired results in India.

In the UK, The measure of annual consumer price inflation rose to 2.8% in February from 2.7 a month ago, well above the government’s target of 2% as per UK’s office for national statistics. The largest upward impact on CPI annual rate came from transport cost due to increase in air fares in February, particularly for traveling to European destinations. Back home in Asia the inflation rate is inching closer to the tolerance level of 3%, in China where it rose from 2.2% in January to 2.8% last month. Similar to India, soaring inflation in the world’s fastest growing economy has put pressure on the Chinese central bank to raise interest rates. Food price a major component of Chinese CPI basket, were up 6% for the month. February data bring inflation for first two months of year to 2.4%, below the government target of a sub 3% rise in CPI index. The world’s largest economy, the US is also experiencing a spurt in CPI index, the benchmark inflation measure.

According to federal open market committee (FOMC), recent reading on core inflation have been somewhat elevated. Although inflation pressure seem likely to moderate over the time, the high level of resource utilization has potential to sustain those pressure. In this situation, the committee’s main policy concerns remain that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth.

However in Japan, the world’s second largest economy, the central bank is faced with a different situation, deflation. Core inflation which excludes food items, fell to zero in January while the Bank of Japan is tightening interest rate despite any increase in prices

Link Press trust of India