The biggest threat that most of the countries especially the Emerging countries are facing is the risk of rising interest rate or use of other fiscal tools to control the inflation. Now for those countries which are facing the pressure of incoming flow of foreign moneys they, are actually feeling the real heat. Because due to interest rate hike lot of investing moneys will be coming to that country, as a result of this their currency will be getting appreciated lot and this will create asset bubbles, as for example China.
Food, metal and oil are the main contributors to increase this inflation. As such the production cost increases due to input cost and that is making the consumption expenditure more.
Now let see some countries ---
PBOC raised reserve requirement by 50 basis-point to 19.5%. Chinese CPI rose to 5.1% in November.
has raised the reserve requirements 6 times and interest rate 2 times in 2010. Chinese factory inflation decreases to certain amount. China
inflation rose more than 8% at the end of 2010 and experts believe that it may 7% in 2011. Russia
Two of the main problem that
is facing now is rising unemployment and inflation, weak labor market and rise in consumer price index is the good indicator of that. These causes making people to revise their growth in 2011 to 1.1%. U.K.
Expert thinks that interest rate will rise in next June and if it is true it will be a rise more or less after 2 years. Rate of inflation may jumps from 3.3% to 4% with in few months . Recent VAT rise also fuel the inflation. Bank of
has a target to keep inflation at 2%. Many experts think that bank may not increase the interest rate if job loss increases this way. Actually they fill an increase in interest rate will bring mortgage problem & rises in repossession that ultimately will delay economic recovery. Anyway house prices are falling in England and if there is more increase in rate that will make thing worse in coming days. U.K.
Euro zone inflation jumped from 1.9% to 2.2%. As euro zone inflation rose above the ECB’s target in December, some countries like
’s December inflation rate quickens. Germany
Bank of Korea forecasted that in 2011 CPI will pick up to 3.5% from 2.9%, last Thursday
raised it’s interest rate to tackle inflation. Expert says that we may see more rate hikes in South Korea in 2011. South Korea
Contrary to the others
’s inflation rate fell in December but CPI increases to 1.25% in December from earlier year, but it’s increase in CPI was slower than November figure. For 2011 experts expect inflation to be around 1.85%. Taiwan
Venezuelan Govt expects inflation to be around 23-25% this year, Govts wants to weak the currency. Govt. may delay raising the price on regulated foods to delay the inflationary effects.
Some other country like
increased their base rate. Peru raised it’s interest rate in few days ago for the 4th time in 7 months to handle inflation. Thailand
For countries which are facing trouble in their economy are facing more trouble due to rate hike to control their inflation because their economy will get slow if they hike rate and the mortgage payers will default more, so it will make things more worse.
Emerging countries such as
India and are facing quite a big threat, in coming future if not the coming days we may see the hike in interest rate for this countries. And also include Indonesia with them, although some are saying that Chinese inflation rate is coming under control. For China the threat is more because not only food price increase but also the oil subsidy which Govt. wants to withdraw in hurry makes thing beyond control. All this countries are facing huge sell-off in stock markets due to fear of rate hike. India
In coming days govt. of this countries need to take bold decision either to give benefit to the saving account holders of the banks or to the markets especially the stock market.
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