(…) The Reserve Bank of India hiked short-term rates – the first time in almost two years – from record lows in a bid to curb surging inflation. In February, its wholesale price index, a major indicator of overall inflation, reached 9.89 percent, well above the government estimate.(…)
India’s move will not necessarily lead to a flurry of interest rate hikes by other major Asian economies, analysts said, as they are set to implement their withdrawal plans in accordance with their different economic scenarios.(…)
Several Asian countries, including Vietnam, Malaysia and the Philippines, have started to tighten their monetary policy following Australia’s policy adjustment last October.
However, facing uncertainty in their economic recovery from the worst global financial crisis in decades, these Asian economies have been cautious in implementing their exit policies.
Wang Jun, China’s vice-minister of finance, told the China Development Forum 2010 on Sunday that the country should not hasten to start exiting from the stimulus measures, which helped its economy expand by 8.7 percent in 2009. "It must be a gradual, measured process."
As inflation picks up amid economic recovery, economists believe that the effective policy tool of interest rate hikes will have to be wielded some time this year.
China, the region’s most vigorous major economy, is forecast to raise interest rates in the second quarter, although some experts said it could come even earlier.
South Korea could raise rates by 25 basis points in June before making bolder adjustments in the second half, predicted Nomura Securities.
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Jct: In the mort-gage musical chairs death-gamble, everyone borrowed P, everyone owes P+I, P/(P+I) survive, I/(P+I) are foreclosed resulting in Shift B inflation, same money chasing less goods, not Shift A inflation, more money chasing goods. Raising interest to fight inflation is silly.