Inflation looks to be cooling in the U.S. and the rest of the developed world, but it's still a big concern for emerging markets, according to the International Monetary Fund (IMF).
Inflation looks to be cooling in the U.S. and the rest of the developed world, but it’s still a big concern for emerging markets, according to the International Monetary Fund (IMF).
In India, inflation runs at close to 12 percent, up from just 3.5 percent a year ago. It’s one of many developing nations with double-digit inflation rates.
Such pockets of high inflation may spark demand for higher wages there, which would lead to higher product prices, boosting inflation further and helping to create a “second-round effect.” It could then spread across borders.
Since 2007, the big inflation threat for the developed world has been fuel costs, as oil surged past $100 per barrel to a record above $140 in July. Crude prices have since eased significantly, helping subdue overall consumer-price inflation.
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In the developing world, though, food costs play a bigger role — and fruit and vegetable prices haven’t all dropped as sharply as crude. In Chile, fruit and vegetable prices rose 4 percent in September over August.
Emerging economies also had been growing at much faster rates than those of the developed world, leading to some overheated economies, the IMF said in its world economic outlook.
To be sure, the slowing global economy likely will help tamp down inflation. For the first time since the spring of 2007, the majority of inflation reports from emerging-market economies are falling below expectations, according to Merrill Lynch strategist Michael Hartnett.