China follows Thailand and South Korea in tightening

Following a rate hike from Thailand on Wed and one from South Korea yesterday, China raised reserve requirements again by 50 bps. This follows the higher than expected bank loan data on Mon and while the move occurred after their market closed, its anticipation sent the Shanghai index down by 1.3%. India’s Dec Wholesale Prices rose 8.43% y/o/y, a touch above estimates and will likely lead to a rate hike from the RBI on Jan 25th. The Indian Sensex index fell to a 4 month low in response. After ECB’s Trichet acknowledged the rising risk of inflation yesterday, Bernanke and his colleagues may be the only central bankers left on the planet who see little inflation pressure because of the US output gap. CPI today will quantify the extent the rise in commodity prices has filtered into consumer prices with the expected m/o/m gain of .4% being the most since Aug ’09. Inflation is there, it’s just a matter of who will eat it, consumers and/or companies.

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