Somewhere in China, an economist lost his job today… it was the poor guy who had been predicting manageable levels of inflation despite rapid headline GDP growth and even more rapid monetary expansion.
Yet, staring at reports which show inflation at a 28-month high, officials at the People’s Bank of China realized that they need to do something about inflation. Now. Especially in light of what’s going on in the world… hence today’s 25 basis point rate hike.
Inflation in China is coming from all sides. Certainly there is the country’s speedy economic growth, commonly reported in the press as ‘overheating’. Then there is the constant battle against America’s #1 export (inflation) as many of Bernanke’s trillions of new dollars have found their way into China’s economy.