Tags: Inflation | Worries | Spread | Globe | us | economy | brazil

Inflation Worries Spread Across Globe, Even in US

Wednesday, 09 Feb 2011 10:32 AM

Inflation worries are spreading like wildfire across the globe, even in the U.S., where monetary policy officials say consumer prices are still not a concern. China recently hiked interest rates to combat rising prices, and Brazil has expressed concern that high food and commodities prices will push up headline inflation rates.

Everyone needs to get ready, officials say.

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Fed Chair Ben Bernanke
Many emerging economies are running out of excess capacity "and yet most of them still have in place the expansionary … monetary and budgetary policies," says John Lipsky, the International Monetary Fund's second in command, according to the Wall Street Journal.

"Everybody is going to need to tighten monetary policy, reduce budgetary stimulus and continue with the process of structural reforms," he said.

In the U.S., inflation rates remain below the Federal Reserve Chairman Ben Bernanke's 2 percent target, although bond markets expect an improving economy and rising food and energy prices will spill over into other goods.

Yields on U.S. Treasurys have been rising, hitting 3.721 percent recently, the highest since April, the newspaper reports.

"What the bond market is sniffing out is higher perceived levels of future inflation," Greg Peters, head of fixed income research at Morgan Stanley, tells CNBC.

"While inflation today looks pretty benign, what bond investors don't like right now is the uncertainty factor around the future inflation picture."

Fed officials have kept interest rates low on the argument that expansionary policies are still needed to get the U.S. economy back on track again.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, has said while "inflation anxiety is rising," monetary policy is not the right tool to handle price hikes confined to certain sectors within the economy.

"For the moment, inflation, properly defined, is tame, in my view. And the rise of individual prices does not signal incipient inflation," says Lockhart, according to Reuters.

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Inflation worries are spreading like wildfire across the globe, even in the U.S., where monetary policy officials say consumer prices are still not a concern. China recently hiked interest rates to combat rising prices, and Brazil has expressed concern that high food and...
Inflation,Worries,Spread,Globe,us,economy,brazil,china
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2011-32-09
Wednesday, 09 Feb 2011 10:32 AM
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