Inflation Is On The Rise Globally
After a period of generally benign price pressures from 2001 to 2006,
global inflation has since risen sharply. The ongoing escalation in
commodity prices has been an important contributing factor. The price
of crude oil, for instance, reached an unprecedented US$140 per barrel
in June 2008, approximately double that of a year ago. More worrying,
the rise in commodity prices appears to have spread from oil and
metals to soft commodities such as wheat, corn and rice in recent
Thus, headline inflation in a number of developed economies has
picked up despite the slowdown in growth. CPI inflation in the US, for
example, rose to 4.1% in the first quarter of this year, the highest in
nearly 17 years. Headline inflation in the Eurozone, averaging 3.4% in
the first five months of this year, has exceeded the European Central
Bank's (ECB) implicit target. While Japan experienced slight deflation
in the first three quarters of 2007, inflation accelerated in the last two
quarters to reach 1% in Q1 2008, the highest in ten years.
Inflation has also emerged as a key concern in other Asian economies.
Domestically, years of rapid growth have led to overheating in a number
of fast-growing countries, such as Vietnam and China, as cost pressures
accumulate. Headline inflation in China, for example, has picked up
sharply to 8% in Q1 2008, up from 2.7% a year ago. In Vietnam, it
rose to 16.4% in Q1 2008, from 6.6% a year ago. Inflation also increased
to 8.9% in India in May 2008 as a result of rising food and energy
2 Based on the Wholesale Price Index, a widely-followed inflation gauge in India.