Well, current focus switches to inflation From news, Fed's success in stabilising the financial situation has let the markets think that the massive growth risks have receded and that inflation is the next monster on the horizon. From my view, its continuing surge in commodity prices has compounded these inflation concerns. World inflation should rise to around 5% in 2008 after 4.2% in 2007.
I think, current original real economy event that triggered the liquidity crisis, like US housing collapse, has not yet run its course. Moreover, just because financial market stabilisation has been achieved does not mean the same is true for the global real economy. In Asia, the effect of the continuing US consumer slowdown will be felt with increasing force.
In China - from news I have heard that, the return of "hot money" flows, as risk aversion and financial stresses related to the subprime crisis fade, appears to have dulled the authorities’ appetite for a faster pace of yuan appreciation. A key risk would be that the panic hoarding of rice may drive a spike in inflation which would be very hard to control.
Next question: Wondering, how much capital was transferred between oil or energy consuming countries and the producing countries due to the surge in energy prices? *errrrr.... some countries become rich and richer - vice versa*
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