Friday, February 18, 2011

No inflation in developed countries - think again

Looking at latest European cost of living index will show rates up at 2.6%. This is from a low of .2% in July of 2009. Now this is not much versus a 2% target and it is much lower than the 4.4% in July of 2008, but there is a clear trend. The UK is up to 3.3%.

Interestingly, some of the countries with the slowest growth in the EU have the highest inflation rates. The World Bank is now saying that rising food prices has pushed 44 million into extreme poverty.

All of this pressure may force more central banks to raise rates. We are seeing this occur in emerging markets, but the true global monetary tightening will begin when the G3 start to raise rates.

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