Imported inflation from emerging countries can no longer be ignored, and central banks on the receiving end might need to tightly constrain domestic inflation to compensate.
This from an important speech by Lorenzo Bini Smaghi today in Bologna. The ECB executive board member points out that food inflation is here to stay and the era of ever-cheaper TVs is over, too:
Unlike the previous decade, the process of reducing the prices of manufactured goods imported from developing countries seems to have ended, particularly in respect of products imported from China. The gradual appreciation of the exchange rates of these countries should further affect the prices of products imported from advanced countries.
So several factors are working to increase imported inflation: Read more