Policymakers declare inflation a top threat

Posted by SM Maulana
Tuesday, 17 June 2008

BRUSSELS – POLICYMAKERS around the world declared soaring inflation a top threat yesterday, with pressure rising for interest rate hikes by central banks amid protests against higher costs of living.

The European Commission, the European Union’s executive arm, said inflation was its main economic concern. This came after data showed that prices in the 15 countries using the euro rose by a new record of 3.7 per cent year-on-year last month, from 3.3 per cent in April.

The comments boosted the euro against the US dollar because they fuelled speculation that the European Central Bank may raise interest rates by more than the already priced-in 25 basis point hike to 4.25 per cent on July 3, traders said.

Inflation in the euro zone, as elsewhere, is fuelled by food and energy costs, surging on a combination of steadily rising demand from fast-growing economies like China and India and some supply disruptions.

Talking to European and Asian finance ministers meeting yesterday on the South Korean resort island of Jeju, South Korean President Lee Myung Bak said the inflation surge was the biggest challenge the global economy had faced in around 30 years.

REUTERS

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