Finance Matters

Posts Tagged ‘pressures’

The Reserve Bank of India (RBI) has today raised key interest rates for the thirteenth time since March 2010, in a bid to tame stubbornly high inflation.

The central bank lifted its main rate to 8.5% from 8.25% as inflation soars on the back of higher food and fuel prices and the measures were widely expected.

Figures recently revealed India’s wholesale price inflation rose to 9.72% last month on an annual basis – significantly above the central bank’s target of between 4% and 5%.

This represented the tenth consecutive month that inflation has been above the 9% mark.

Inflation reached a two-year high earlier this year of 10.16%, after food, fuel prices and manufactured goods surged – the highest among the Group of 20 leading nations.

Annual food inflation has surged, causing major problems for the 450 million people who live below the poverty line in the country.

However, economists say that the RBI has a difficult task to bring inflation down amid signs of slowing growth.

Prime Minister Manmohan Singh has previously said inflation is a “serious threat” to the country’s growth.

It is currently the world’s second fastest-growing major economy, behind China. However, the central bank has slashed its growth forecast from 8% to 7.6% for the fiscal year that ends next March.

In a statement, the RBI said: “Slower global growth will have an adverse impact on domestic growth, particularly on industrial production, given the rising inter-linkages of the Indian economy with the global economy.”

In the meantime, the RBI warned that inflation will remain high in the short-term.

“Inflation is broad-based and above the comfort level of the Reserve Bank. Further, these levels are expected to persist for two more months,” the bank added.

Inflationary pressures are rife throughout the world, particularly in Asia, and many central banks are hiking interest rates in order to tame inflation.

Inflation in the world’s second largest economy eased last month after reaching a 3-year high in July.

According to the National Statistics Bureau, consumer prices rose by 6.2% in August on an annual basis, compared with 6.5% the previous month.

Several other economies throughout the world are battling with higher inflation, particularly in Asia, which are the result of soaring food costs.

A report published yesterday showed global food prices are hovering near an all-time high, according to the UN Food and Agriculture Organization (FAO).

The index hit a level of 231 points in August – a rise of more than a quarter compared with the same period a year ago.

Back in February, the index hit an all-time high of 238 points.

China’s Government has made several attempts to contain prices and it has previously said it will make reining in prices its top priority.

The People’s Bank of China has hiked interest rates several times in the last twelve months in a bid to tame inflation – measures which several other Asian countries have adopted.

Analysts now believe inflation has reached its peak and will fall back during the remainder of the year as policy measures take effect.

Inflation fears are always a concern to Chinese officials due to the potential for price rises to trigger civil unrest.

However, despite the fall in consumer prices, analysts still believe the Government needs to do more to contain rising prices.

According to one economist, the fall in inflation was attributed to a moderation in pork price rises.

However, the news lifted Asian markets with Hong Kong’s Hang Seng Index adding 0.2%, while the Australian ASX Index was 0.2% higher.

However, Japan’s Nikkei Index lost 0.3% after date revealed the economy performed worse than originally thought in the second quarter.

In the meantime, separate figures released today show Chinese industrial output rose 13.5% in August on an annual basis, albeit slower than July.

The People’s Bank of China has today lifted interest rates – the third time this year – as it battles to tame inflation. Inflationary pressures are rife in Asia and many central banks have opted to hike interest rates in an attempt to combat rising prices. The bank said the one-year lending rate will rise [...]

In its annual report, the Bank for International Settlements (BIS) has warned that global interest rates need to rise in order to tame inflation. The report also said low interest rates are a threat to world financial stability. In the aftermath of the financial crisis, central banks opted to slash interest rates in an effort [...]

Inflation in the world’s second largest economy reached the highest level in 34 months in May as food prices continue to rise. Consumer prices rose by 5.5% in May on an annual basis – higher than expectations of an annual rate of 5.3%. Food prices (the primary factor behind stubbornly high inflation) remain high, rising [...]