Varied Reports of Inflation

Diverse inflation rates, defined as the year-over-year percentage increases in the consumer price indexes, were reported for six countries--Indonesia, Korea, Peru, Switzerland, Turkey and Venezuela--yesterday and today.

The two oil producing countries, Indonesia and Venezuela, reported inflation rates of 16.0% and 9.1%, respectively. The trends in their inflation rates are shown in the first chart. From a peak of near 40% in mid 2002, inflation in Venezuela appears to have stabilized at about 15%. Indonesia, which is the only member of the Organization of Petroleum Exporting Countries (OPEC) that is a net oil importer, has held inflation in check, until recently, by subsidizing domestic fuel costs.On October 1, however, the government reduced, dramatically, these subsidies by almost tripling the price of kerosene and more than doubling the price of diesel. The central bank has just raised its benchmark interest rate a full point to 11%, the highest rate in more than two years to contain the expected rise in inflation.

Peru which suffered bouts of hyper inflation prior to the early nineties experienced a marked decline in its inflation through early 2002, when it subsequently began to rise moderately. From a peak of 4.75% in July, 2004, it has since declined to 1.11% in September. As one of the currently low inflation countries its inflation rate is shown with that of Switzerland, another low inflation country, albeit of longer standing. In September Peru's inflation rate at 1.11% was actually below that of Switzerland's 1.36%.

Turkey is another country that has experienced bouts of hyper inflation in the past and has since taken measures that have brought about a reduction in the rate of inflation from 73% in January, 2002 to 8% in September. In the third chart inflation in Turkey is shown with that of Korea. Different scales have been used in this chart as inflation in Korea has ranged only between roughly 2% and 5.2% while that of Turkey has ranged from 7% to 73%.