Inflation is rampant around the world, in both rich and emerging countries, as increased prices for raw materials burn a hole in consumers' pockets. From the United States, through Europe and Asia, governments and central banks are scratching their heads for ways to stop runaway prices.

In the United States, consumer prices have risen by 5%, preventing the Federal Reserve from reducing its interest rates even further to help an economy which is verging on a recession. In the eurozone, the rate price increases has more than doubled in a year to reach a record 4.1% in July, more than double the European Central Bank's inflation target of close to but below 2%. Inflation stands at 3.6% in France, at 4.4% in Britain - its highest level for 16 years - and at its highest level for 12 years in Italy (4.1%) and 11 years in Spain (5.3%). In Germany inflation stands at 3.3%, the highest figure since 1993.  Meanwhile, in Asia, Japan, which for a long time suffered from deflation, has seen its core inflation rate hit a fresh decade-high of 1.9% in June as consumer prices rose for a ninth straight month. In India there a fears of a monetary belt-tightening to deal with an annual inflation which has reached 12%. Inflation has been at its most spectacular in several emerging countries like Egypt (23%) or Thailand (27%) where price rises have brought people into the streets to protest. In China inflation has been slowing for three months, even if the inflation rate remains high at 6.3% on an annual basis. [Source: channelnewsasia.com, August 2008]

In Hong Kong, inflation accelerated last month, equaling February’s 10-year high of 6.3% according to the latest statistics announced by the Census and Statistics Department.  July’s inflation was higher than that in June (6.1%), mainly due to the enlarged increases in the price of fresh vegetables and private housing rentals. Basic food price inflation year-on-year remained elevated at 19.7% last month and private residential rents in June were up 8.8% from 8.4% a year earlier. The government spokesman added that the inflation outlook for the rest of the year is rather uncertain. Although food and energy prices in the international markets have eased somewhat more recently, they remain elevated compared with a year earlier.  However, the improvement in labour productivity and the expected moderation in the rate of economic growth in the period ahead should provide some alleviation effect.  [Source: The Standard/ HKEJ (P2), 22 Aug 2008]

While inflation continues to rise, Hong Kong’s year-on-year economic growth is expected to ease significantly in the second half of this year to between 2.2% - 4.2%, the government says. First-half growth averaged 5.8% year on year. The official growth forecast for this year remains unchanged at between 4-5%. Growth slowed to 4.2% in the second quarter, from 7.3% in the first quarter. Gross domestic product shrank 1.4% quarter on quarter in the second quarter, the first fall in five years.  [Source: SCMP (A10)/ HKEJ (P2)/ China Daily (HK-2), Aug 16]