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Fruit and vegetables are displayed for sale outside a shop, in east London, February 15, 2011. (PAUL HACKETT/REUTERS/Paul Hackett)
Fruit and vegetables are displayed for sale outside a shop, in east London, February 15, 2011. (PAUL HACKETT/REUTERS/Paul Hackett)

Explainer

Inflation rearing its head in developing nations Add to ...

<p>Inflation is simmering in much of the developing world, as economies that were on the verge of overheating grapple with surging food and energy prices. This has investors fearing that central banks from China to Brazil may need to hike interest rates aggressively to fight it, or that rising costs for factories could force companies to raise prices too quickly and choke global demand. A toxic brew of high unemployment and rising prices helped fuel the popular revolts sweeping Arab countries.</p><p>In still-recovering richer economies, central bank responses depend to an extent on whether policy makers pay closer attention to "headline" or "core" inflation, which looks past the effects of prices that swing wildly, such as for food and energy. Focusing on core inflation gives a better sense of whether the more volatile items are causing other prices to accelerate or are putting pressure on wages.</p>

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