ACROSS Asia inflation is rising, largely because of higher food and energy prices. China's inflation rate surged to an 11-year high of 7.1% in January and looks set to climb further this month, after some severe snow storms. India, Indonesia, Thailand and Singapore all have inflation rates above 4%.
Central banks are reluctant to raise interest rates by much at the same time as America's Federal Reserve is slashing its rates, for fear this would attract foreign capital and push their currencies sharply higher. Stronger currencies would in fact help to reduce the price of imported food and energy. But instead, many governments are resorting to price controls and government subsides to curb inflation. India has long imposed price ceilings on a wide range of goods. Thailand, Malaysia and the Philippines are considering new price controls or subsidies. In January the Chinese government froze the prices of energy, transport and water, and announced that producers of essential food items, such as meat, grain, eggs and cooking oil must seek approval before raising prices.
Central banks are reluctant to raise interest rates by much at the same time as America's Federal Reserve is slashing its rates, for fear this would attract foreign capital and push their currencies sharply higher. Stronger currencies would in fact help to reduce the price of imported food and energy. But instead, many governments are resorting to price controls and government subsides to curb inflation. India has long imposed price ceilings on a wide range of goods. Thailand, Malaysia and the Philippines are considering new price controls or subsidies. In January the Chinese government froze the prices of energy, transport and water, and announced that producers of essential food items, such as meat, grain, eggs and cooking oil must seek approval before raising prices.
Inflation has become a huge problem forcing the chinese government to "monitor" food because most of inflation is being drivin by food and not by aggregate demand. The inflation rate is supposed to keep climbing with all the bad weather expected in the future.
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