Is inflation an upcoming battle?

Asia is facing an impending battle with inflation, and it will be a very long one.

Indonesian central bank on February 4th announced a 25 basis point increase in its BI rate, or increased from 6.5% to 6.75% after 18 months unchanged. Bank Indonesia, as reported by The Jakarta Post said that this action was necessary to maintain a manageable level of inflationary target, ie. within 5.0-6.5% range, and manage future expectations of price level.

In a different battlefield, Vietnam on February 11th announced another devaluation of Vietnam Dong by over 9%. This measure was taken primarily to manage inflation and deficit.

Coincidently, McKinsey Global Institute in December 2010 also published a report that suggests the era of cheap capital (meaning low interest rate) is going to end. Read more here.

With this development, many economies may resort to tightening up their monetary policy and budgetary position, which may be killing some new hope of post-recovery boom in the Western world.***