BackQuick Edit | Tightening in Beijing
Quick Edit | Tightening in Beijing
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China has now raised interest rates twice in just over a month, a clear indication that it is not taking the inflation threat lightly. There are also indications that it will allow the yuan to appreciate to reduce import prices of various commodities such as oil.
Most Asian economies are well behind the curve as far as monetary policy tightening goes—and India is no exception, though domestic policy interest rates have been hiked seven times since early 2010. Inflation has now moved beyond food to manufactured goods.
The big question right now is what damage the rise in inflation and interest rate will have to economic growth. Prime Minister Manmohan Singh has already indicated last week that high inflation is a threat to growth. Steering between the competing demands of keeping prices under control and keeping growth on track will test the ability of policymakers in Mumbai and New Delhi.
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