Fighting the inflation is a key economic priority for China this year because the government aims to limit the risk of social unrest, Prime Minister Wen Jiabao in a speech to the country conditions.
“We can not afford the price increases to affect the normal life of people with low incomes,” said Wen in the report the annual meeting of The Chinese meeting of MPs in Beijing today. “This problem affects the welfare of the people has common interests and concerns social stability.”
The 64-year-old Wen confirmed targets 4 percent inflation for the whole year and 8% growth against attempts by the Communist Party to provide support for the 61-year rule. Over the past two weekends government sent hundreds of police in Beijing and Shanghai after the Internet calls for protests, inspired by bunks in the Middle East and North Africa.
“Inflation has the potential to trigger social unrest,” said Liu Li-Gang, an economist at Australia & New Zealand Banking Group in Hong Kong. The government should increase interest rates on loans and deposits by 0.75 percentage points by year’s end, and to raise wages and to grant aid the poor, he said.
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The Federal Reserve (Fed) should start the withdrawal of its programs for injection of liquidity before inflation becomes a serious problem, says Jeffrey Lakar, president of the Central Bank in Richmond. After the Fed meet 50% of its second program of liquidity injections worth 600 billion dollars, known as the QE2, the price increase is already tangible, he said. Lakar said the Fed should anticipate the trend and to launch a review of the program for infusing liquidity now while the economy is still in the initial phase of recovery.
“The recovery is stable, growth will accelerate,” he says. “At this stage the business cycle should withdraw monetary stimulus in order not to let inflation.”
Better is the central bank to start selling bonds before interest rates increase, says Lakar. The Fed monetary policy aimed to create a healthy level of inflation by between 1% and 2%, which would be indication that the economy grew by controllable pace.

The next global recession can be expected around 2012, said investor Jim Rogers. It may, however, is much more severe since then central banks will be able to pour so much money on the market because of inflation, which will raging, he said, quoted by CNBC. Today, the RBI decided to increase interest rates, thereby joining countries such as Canada, Norway and Australia did the same. The reason for increased interest is the danger of inflation and the rapid economic development. “The world is inflation, while most central banks to deny,” said Rogers and stated that every four to six years in the U.S. has recession. This leads him to believe that the next recession will occur in particular around 2012. “When she came, the world will be in far worse condition, as will already have exhausted all the bullets. Does Bernanke will print more money? No, I will do the trees in the world, “said Rogers. According to Rogers, the fact that the profits of U.S. companies are above expectations does not mean at any cost, that recovery is stronger than expected. “I’m sure part of that relates to expectations, but remember what you compare. Talk about the second quarter of 2009 when we thought that the world ends, “said Rogers.
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