BEIJING – China and India reported higher-than-expected inflation readings on Friday, giving fresh ammunition to central bankers and investors alike who are worried about mounting price pressures in the global economy.
Consumer prices in the euro zone also picked up more than expected, while figures due later in the day from the United States are expected to show a similar trend, with the inflation rate still moderate but steadily rising, not least because of higher food and energy costs.
Prices of oil and grain, in turn, are climbing in part because of strong growth in China, India and other emerging economies, which have shown the developed world a clean pair of heels since the global financial crisis. Consumer price inflation in China quickened to 5.4 percent in the year to March, the fastest rate since July 2008, from 4.9 percent in the first two months of the year.
In India, the Wholesale Price Index, the main inflation gauge, rose 8.98 percent in the year to March, up from 8.31 percent in the 12 months to February and beating market projections of an 8.36 percent reading. “The weakness in markets this week is expected after the smart comeback we have seen recently, with inflationary concerns again coming to the forefront,” said Jan Lambregts, global head of financial markets research at Rabobank.
Economists expect the central banks of both countries to tighten monetary policy further in short order to dampen inflationary pressure. A rise in the proportion of deposits that Chinese banks must hold in reserve, rather than lend out, could be imminent after Premier Wen Jiabao in midweek reaffirmed his determination to keep a lid on prices. Core inflation, excluding food and energy, was the highest in China in a decade.
In India, too, a sharp upward revision to figures for January has led some economists to the conclusion that underlying price pressures are greater than they had thought.
