If inflation goes down, So the whole world would feel relieved from him, Because then perhaps the US Federal Reserve would have shown some laxity in its policy of raising the interest rate. But the latest inflation data showed that so far this policy has failed to contain inflation.
The world’s eyes were on the US inflation rate data for April. It was being eagerly awaited in America itself. Several market experts in the US had said that the inflation rate there had reached its peak in March. So now it will start to decline. If this were the case, then the whole world would feel relieved from it, because then perhaps the US Central Bank – the Federal Reserve would have shown some laxity in its policy of raising the interest rate. This policy has caused turmoil in markets around the world. However, when the inflation data was released on Wednesday, it was clear that so far this policy has failed to contain inflation. The overall inflation rate further increased by 0.3 percent. Of particular concern was the fact that core inflation reached 0.6 percent. Core inflation does not include the inflation rate of fuel and food, as the market prices of both these items are assumed to be of a volatile nature. Whereas, rising core inflation means that inflation is widening. So now the question has arisen, what will American policy makers do? One thing is certain that they will continue their policy of reducing the availability of money in the market by raising interest rates.
This will result in investors feeling more secure and profitable investing in dollars and withdrawing their money from emerging economies. Because of that the stock indices of those countries and the value of their currency will continue to fall drastically. This trend is continuing in India and its effect was seen on Thursday as well. So it is coming to the fore that there is an economic turmoil in the world. In the midst of this, the World Bank has rightly warned that the bankruptcy situation of Sri Lanka is just the beginning. According to the bank, at present, 107 low and middle income countries of the world are facing such difficulties, which can result in a situation like Sri Lanka. By the way, the signs are not good for an emerging economy like India.