Beyond the World news headlines
Just by reading this blog, you may be fuelling inflation
Soaring energy and food prices are the top concern at the Group of Eight finance ministers meeting in Japan this weekend, while central banks are keeping their fingers crossed that they can find a solution without killing off shaky economic growth.
U.S. consumers’ mood plunged to a 28-year low in June as soaring inflation pinched at their purse strings.
High petrol prices pushed U.S. inflation up to a six-month high of 4.2 percent in May, a trend seen even more starkly across the Atlantic, where inflation is at a record high of 3.6 percent in the euro zone and a near six-year high of 3 percent in the UK.
But some economists warn that blanket media coverage is only making the matter worse and feeding a vicious circle.
Every news story makes shoppers and investors feel more pessimistic about their loss of spending power, pushing up inflation expectations and ultimately maybe making central banks more likely to take action by raising interest rates.
“It’s not exactly chicken and egg but you can’t help feeling it creates a kind of hype, and people often believe the hype,” Dresdner Kleinwort analyst Rainer Guntermann said.