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Jakarta: Asian policymakers grappled with a response to inflation yesterday in an era of $120-a-barrel oil and record commodity prices, with Jakarta raising rates and others saying they hoped the problem would soon be under control.
Inflation in the Philippines neared a three-year peak, but the central bank said it would keep its powder dry until prices start feeding into wages.
A Korean state think-tank forecast the fastest inflation in seven years in 2008, but the only move analysts expect from this week's policy review is a rate cut to shore up sagging growth.
In India, where the central bank kept its rate steady last week, an official said he expected inflation to moderate within weeks.
It took the news of a planned fuel price hike to force the Indonesian central bank into its first rate hike in since December 2005.
Fuel costs
After April inflation spiked to a 19-month high, the government said on Monday it planned to raise fuel prices, a highly sensitive issue that has sparked protests in Indonesia in the past and contributed to the downfall of the Suharto government in 1998.
"If the average fuel price hike is at around 30 per cent this month, then May inflation is likely to spike very high. The year-on-year figure might rise to double digits," said Juniman, an economist at Bank Internasional Indonesia.
Several regional central banks have resisted raising rates for fear they could hurt economies already feeling the impact of the global credit crisis, triggered by mortgage defaults in the US, the biggest export market.
Many governments have opted for subsidies and export controls to contain inflation, much of which they believe has its roots in the strong global demand for fuel and other commodities.
Economists say some central banks are behind the curve, letting loose monetary conditions push real interest rates, adjusted for inflation, into negative territory. That in turn has spurred inflation higher by forcing consumers to spend more rather than save.
Consumer prices are rising at a double-digit pace in Vietnam and Sri Lanka. Inflation has hit a 26-year high in Singapore, and is near decade-highs in China and Hong Kong.
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