INFLATION

THE SPECTRE OF INFLATION IN ASIA

It isn't just China and India – most of Southeast Asia will be hit

Asia Sentinel, April 5, 2011

Almost all of Asia is behind the inflation curve. And blaming US quantitative easing makes little sense when most of these countries – not just China – have been continuing to mop up US treasuries and other low-yield western debt, rather than follow policies which would damp inflation but might harm exports.

Consumer price inflation hit 5 percent in Singapore in February. Given the city's tight fiscal policy and rising currency – the US dollar has declined from S$1.40 to S$1.26 over the past year – one can expect that inflation in Asia is becoming ever more deeply ingrained. For sure, Singapore's inflation spike may prove a partly temporary, driven by one-off local factors as much as international ones. Still, for the full year it now looks sure to be at the top end of the 3-4 percent official forecast range. Meanwhile savers continue to lose out thanks to interest rates of just 0.3 percent on savings deposits and with a 10-year government bond yield just under 3 percent.

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