Rising Inflationary
Pressures in Faster-growing Economies
In 2009, falling
commodity prices and tepid demand resulted in consumer
price index (CPI) inflation declining in Q2 and Q3
in the G3 and Asia ex-Japan economies. In particular,
consumer prices in Japan fell for five consecutive
quarters from the beginning of 2009. In contrast,
consumer prices in the US and Eurozone have now begun
to rise, although core inflation remains muted given
the prevalence of excess capacity in these economies.
With demand recovering
more rapidly in Asia ex-Japan, consumer prices in
the region have risen more quickly than in the G3,
averaging 1.7% in Q4 2009 and Q1 2010 as compared
to 0.9% for the latter. Consequently, regional central
banks have begun to tighten monetary policy to temper
inflationary pressures and curb the build-up of financial
imbalances. |