Headline: Pimco sees rising inflation for 3 - 5 years
- Inflation set to increase in next 3-5 years, says Pimco
- Rising commodity prices are not "transitory"
- By focusing on core inflation, Fed could risk making policy error
NEW YORK (MarketWatch) -- Prospects of higher commodity prices and currency shifts will drive global inflation higher in the next few years, according to a report released Monday by Pacific Investment Management Co., the world's largest bond fund.
The upward push from commodity prices also raises risks of a monetary-policy error by the U.S. Federal Reserve and other central banks.
Pimco expects inflation in the developed economies, including the U.S., "to average about 3% and developing market inflation to average about 5% over the secular horizon," which is generally considered the next three to five years.
Source: marketwatch.com
Headline: Interest rates must rise worldwide, says BIS
The BIS warned low cost of borrowing had resulted in a credit and property price boom that was fuelling inflation, especially in emerging economies.
Central banks across the globe have cut interest rates in an attempt to boost growth after the 2008 financial crisis.
However, BIS warned that the policy may prove to be counterproductive.
"The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis," the bank said in its annual report.
Source: bbc.co.uk
