In Fighting Inflation, Asian Central Banks Face Challenges on Multiple Fronts

Rajiv Biswas, Asia Chief Economist, IHS Global Insight, discusses the upturn in global commodity prices and whether they are the main causes of rising global inflation and talks about whether climate change and MidEast tensions are in turn, the main causes for the uptick in these two items.

He discusses too, whether monetary policy / interest rates are sufficient in containing inflation, whether governments should also complement monetary policy with fiscal policy, whether state policies such as subsidies and price controls are working and whether these actions will in fact exacerbate the crisis.

He provides views on how destabilising rising food costs can be on global growth, whether he thinks Asian governments are mistaking this jump in commodity prices to be cyclical, and not secular, whether Asia is behind the curve on fighting inflation, and whether he thinks that rates need to go higher to reduce price gains risks.

He also addresses the problem of hot money and the possibility that higher rates may only attract more of it as investors seek more generous returns. He also talks about another problem with raising rates: the need for central banks to balance inflation risks with poverty.