Inflation across the emerging world has been heading in different directions in recent months. In Latin America and Emerging Europe it has risen, led by increases in regulated prices in Brazil and the pass-through from a much weaker rouble exchange rate in Russia. Further increases in inflation in both countries will ensure that interest rates remain high over the coming months. But inflation is less of a concern elsewhere. In India and South Africa, two countries that have previously had problems with high inflation, lower oil prices have dragged down CPI rates. Meanwhile, lower energy costs have raised concerns about deflation in parts of Emerging Asia and central Europe. We expect any deflation to prove to be temporary, but even so it will ensure that monetary conditions remain loose over the coming months.
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