Of all the things policymakers have had to worry about in the past couple of years, inflation wasn’t one of them. Some even heralded the end of inflation. Today, inflation still isn’t a ‘problem’ in Asia. For the most part, it remains relatively modest, but it is on the rise in some countries in the region. And understanding what is driving that inflation matters. Policymakers need to consider the sources of inflation in choosing policy actions and policy tools. The issue of what drives inflation—or so-called inflation dynamics—is examined in our October 2010 Regional Economic Outlook for the Asia and Pacific region. In this post, Anoop Singh discusses the findings.
The year 2010 has opened amid generalized—–but tempered—optimism about the global economic and financial outlook. The unprecedented scale and scope of the anti-crisis measures taken during the past year—and the unprecedented degree of multilateral policy coordination involved in their design and implementation—appear to have succeeded in averting a downturn of historic proportions. But looking forward, the new decade is ushering in a series of at least five key challenges.