Global Inflation a Problem. We’ve got a growing problem with US and global inflation, no matter what our Federal Reserve Bank says. Although our Fed ignores them, or says they will go down soon, food and energy costs are rising and global, right? Thus higher inflation is a global issue.
ASIA. Many Asian countries are fighting today’s rising inflation with higher interest rates, countries like China and Australia. Others are capping prices. China’s overall inflation rate just soared 7.1% in January after jumping 6.5% in December while producer prices (their PPI) jumped 6.1% in January on higher oil and raw materials prices. These higher producer costs translates into higher prices on China’s exports which hits US, European and other buyers. China’s export prices just rose for the 8th straight month. And the current US Federal Reserve rate cuts are giving Asia fits as well. We live in a global economy now. You see, when we lower rates it widens the spread between US interest rates and Asian interest rates and thus more foreign money flows over to Asia which just increases their money supply which in turn boosts inflation. Anyway, Asian countries are trying a variety of measures to control rising prices. Below are some problems and attempted solutions, few of which have proven successful in the past.
EUROPE. Over in Europe it’s even harder to battle inflation with higher interest rates because of the weakened financial system from the global credit crunch and because of concurrent slowing economic growth. But with a well known history of runaway inflation ruining European economies and currencies, the European Central Bank has resisted lowering interest rates. Keeping rates high as long as possible it today’s approach but many feel Europe will have to capitulate and fight an oncoming recession.