Double-digit roach motel

16 June 2008 By Martin Hutchinson

The number of countries suffering doubledigit inflation has grown sixfold in the past year. Typically, joining the club leads to price controls. But they fail, and only politically toxic interest rate hikes can lead to an exit. Realising that takes time and courage.

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Twelve of the 55 countries whose data are surveyed weekly in The Economist had doubledigit inflation rates in the latest 12 months: Russia, Turkey, Indonesia, Pakistan, Venezuela, Egypt, Saudi Arabia, South Africa, Estonia, Iceland, Latvia and Lithuania.

In addition, Argentina's inflation appears to be well into double digits the official figure of 8.6% has been questioned.

A year ago, only two of the 55, Venezuela and Egypt, had doubledigit inflation in the preceding twelve months. Nine of the twelve currently have negative short term real interest rates, with an average real interest rate of minus 6.2%. The exceptions are Turkey, Iceland and South Africa.

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