The world is experiencing a dramatic bout of inflation. Except for the places where it is not. Sharp price rises in the US and UK — where the headline consumer price index is up by 6 per cent and 4 per cent, respectively — have raised fears of a disastrous mistake by central banks and a return to the chronic inflation of the 1970s. But across much of Asia, price rises are subdued. That divergence holds lessons for economic policy, now and in the future.
In China, the consumer price index is up by 1.5 per cent compared with a year ago, while in Japan, as usual, inflation is roughly zero. In Australia, the headline CPI may be up by 3 per cent, but underlying inflation of 2.1 per cent is towards the bottom of the central bank’s target range.
Only two big emerging markets in Asia have inflation running above 5 per cent — Sri Lanka and Pakistan — compared with many in Europe and South America. Seen from Tokyo, Beijing or Jakarta, the global surge in inflation does not look global at all.