Asia tries to get a grip on inflation
May 07, 2008. Australia - Asia grappled with a response to inflation
on Tuesday in an era of $120-a-barrel oil and record commodity prices,
with Indonesia raising rates and other countries saying that they
hoped the problem would soon be under control.
Inflation in the Philippines neared a three-year peak, but the central
bank there said it would hold steady for the time being.
In India, where the central bank kept its policy rate steady last
week, an official said he expected inflation to moderate within weeks
It took the news of a planned rise in fuel prices to prompt the
Indonesian central bank to make its first rate increase since December
2005.
Several regional central banks have resisted raising rates for fear
that they could hurt economies already feeling the impact of the
global credit crisis, triggered by mortgage defaults in the United
States, the biggest ex****t market for much of Asia.
Many governments have opted for subsidies and ex****t controls to
contain inflation, much of which they believe has its roots in the
strong global demand for fuel and other commodities.
Economists say some central banks are behind the curve, letting loose
monetary conditions push real interest rates, adjusted for inflation,
into negative territory. That in turn has sent inflation higher by
forcing consumers to spend more rather than save.
In Australia, the central bank on Tuesday kept interest rates steady
at a 12-year high of 7.25 percent and made comments suggesting that
policy makers were becoming less concerned about inflation than
markets had expected.
After a monthly policy meeting, the Reserve Bank of Australia's
governor, Glenn Stevens, acknowledged Tuesday that inflation would be
high in the short term but was expected to fall gradually as demand
cooled.
The Australian central bank raised rates in February and March.
The Philippines also expressed hope that inflation might be cooling
while re****ting that the April consumer price index jumped by 8.3
percent from a year earlier, the biggest rise since May 2005.
The price of rice in the Philippines soared by nearly 25 percent from
a year ago. Overall food prices rose 12 percent, the government said
on Tuesday.
Analysts said they expected the Philippine central bank to soon make
its first rate increase since October 2005.
The South Korean research organization, the Korea Development
Institute, lifted its 2008 inflation forecast to 4.1 percent from 2.8
percent. The Bank of Korea plans to meet on Thursday for its rate
review, and economists polled by Reuters could not agree on whether it
would cut its benchmark interest rate or hold it at 5 percent.
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