Keep policy tight lest inflation slips anchor

The Economist says double-digit price rises are about to afflict two-thirds of world.

"In countries such as China, India, Indonesia and Saudi Arabia even the often dodgy official statistics show prices have risen 8-10 per cent over the past year; in Russia the rate is over 14 per cent; in Argentina the true figure is 23 per cent and in Venezuela it is 29 per cent."

The global risk is that the developing nations repeat the mistakes of the developed nations in the 1970s.

"With an economic serial killer on the loose, one way or another monetary policy will have to tighten and exchange rates rise." Henry adds that, with inflation already out and about, a serious global economic slowdown will be needed.