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Alex’s Notes: Unexpected inflation?? You have got to be kidding me.

It does not cease to amaze me how often main stream media financial analysts are either completely ignorant of how the economy works, or are deliberately creating spin to keep consumers fat dumb and happy.

The bottom line is we have added over 14 TRILLION dollars to the money supply and currently the rate of adding money is only increasing. We are about to hit 19% in terms added change to money supply.

How anyone can expect that we will not see price increases under such conditions and call themself a financial analyst is beyond my comprehension.

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India’s Inflation Unexpectedly Accelerates on Food
By Cherian Thomas

May 16 (Bloomberg) — India’s inflation rate unexpectedly rose to the highest in 3 1/2 years, adding pressure on the central bank to raise borrowing costs further to tame prices.

Wholesale prices rose 7.83 percent in the week ended May 3 from a year earlier, after gaining 7.61 percent in the previous week, the government said in a statement in New Delhi. Economists surveyed had expected a 7.55 percent increase.

Increasing borrowing costs will check the flow of money to speculators in the commodities market and rein in food prices, former central bank Governor Bimal Jalan said in parliament last month. The government, to augment monetary policy action, has persuaded steel and cement makers in the past week to cut prices and help slow inflation.

“More monetary tightening cannot be ruled out,” said Rajeev Malik, senior economist at JPMorgan Chase & Co. in Singapore. “More measures are likely as inflation is expected to remain above the central bank’s target of 5.5 percent.”

The index for fruits, vegetables and other food items rose 0.5 percent, while that for manufactured products gained 0.3 percent, today’s statement showed.

The rupee declined to 42.73 against the dollar from 42.65 before the data was announced. The yield on the benchmark 10- year bond was little changed at 7.88 percent, holding near this week’s high.

China Inflation

India and China, the world’s fastest growing major economies, are battling rising prices stoked by consumer demand and high food costs. Wholesale prices in China rose 10.3 percent in April from a year earlier, the fastest since at least 1999.

India’s central bank twice asked lenders to set aside more funds last month, raising the so-called cash reserve ratio to 8.25 percent, the highest since March 2001, from 7.5 percent. The Reserve Bank of India may raise the ratio for a third time this year to control inflation, according to six of nine economists surveyed by Bloomberg News on April 30.

India’s cement makers joined steel producers on May 14 in pledging to cut prices after Finance Minister Palaniappan Chidambaram said the government will take “administrative action” against them for behaving like cartels.

Chidambaram yesterday said there is significant scope for further reduction in cement prices. Steel Authority of India Ltd. and other Indian steelmakers on May 7 agreed to lower prices for a second time since April.

Indian Elections

The Associated Chambers of Commerce and Industry, an Indian trade organization, says it expects the combination of steps taken by the government, central bank and companies to slow inflation to 6 percent in the next four to six weeks.

Prime Minister Manmohan Singh’s government has been stepping up measures to cool prices in Asia’s third-largest economy to improve his re-election chances in a vote that must be held before May 2009.

The government wants to bring inflation down to 4 percent, to protect consumers in a nation where the World Bank estimates half the 1.1 billion population live on less than $2 a day.

Over the past two months, the government scrapped import duties on edible oils, steel products and banned the export of cement, pulses, rice, wheat and edible oil to contain prices.

Last week, under pressure from its communist allies, the government also banned futures trading in soybean oil, rubber, chick peas and potatoes to reduce speculation. It halted wheat and rice contracts last year and lentils in 2006.

Today’s inflation rate may be revised in two months when India’s government reviews the figures after receiving additional price data. The Commerce Ministry today increased the inflation rate for the week ended March 8 to 7.78 percent from 5.92 percent.

                       Week Ended    Week Ended     Percentage
                         May 3         April 26        Change

Primary articles         239.3         238.6           0.3
Fuel, power              345.4         342.5           0.8
Manufactured products    198.9         198.3           0.3
Food products            204.3         202.8           0.7
Edible oils              186.6         187.9          -0.7
Cement                   220.8         221.6          -0.4
Iron & steel             354.6         360.6          -1.7
Pulses                   241.8         243.9          -0.9
Fruits & vegetables      253.2         247.1           2.5
Total                    228.6         227.7           0.4

http://www.bloomberg.com/apps/news?pid=20601068&sid=aN4UwM8U3oQA&refer=economy

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This entry was posted on Tuesday, May 20th, 2008 at 11:48 am and is filed under 3 - Understanding The Economy, 4 - Inflation, BRIC - Brazil, Russia, India, China. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.