The central bank (BI) is now contemplating how to contain inflation that has jumped after the government raised fuel prices last month.
The most commonly used instrument to contain inflation is increasing interest rates by the central bank. But given that the inflation this time is mostly due to spikes in food and oil prices caused by temporary shocks in supply and speculation, questions arise whether monetary tightening is warranted.
Tightening monetary policy could stoke economic growth, the last thing the country expects in the midst of a global slowdown. The expectation is that prices will soften as supply responds to higher prices and commodity prices drop off their year-on-year comparison.
Food prices account for 40-50 percent of the consumer price index in emerging countr
The most commonly used instrument to contain inflation is increasing interest rates by the central bank. But given that the inflation this time is mostly due to spikes in food and oil prices caused by temporary shocks in supply and speculation, questions arise whether monetary tightening is warranted.
Tightening monetary policy could stoke economic growth, the last thing the country expects in the midst of a global slowdown. The expectation is that prices will soften as supply responds to higher prices and commodity prices drop off their year-on-year comparison.
Food prices account for 40-50 percent of the consumer price index in emerging countr
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