Inflation Worries Spread-China Raises Rates Amid Hit to Wheat Crop;Treasury Yields at 9-Month High
By BOB DAVIS And AARON BACK
Inflation jitters spread through emerging markets on Tuesday, prompting China’s central bank to raise interest rates for the third time in four months amid worries that a drought threatening the country’s wheat crop will put further pressure on global food prices.
With fireworks still echoing from China’s Lunar New Year holiday, its central bank said it is raising rates by one-quarter percentage point. It was just the latest move by an emerging-market government – several of which are deploying a panoply of policies to battle inflation fueled by rising food and commodity prices and growth that is threatening to outstrip their productive capacity.
In Brazil, Latin America’s largest economy, the government reported Tuesday that inflation is accelerating, leading markets to expect its central bank to increase its overnight rate, already at 11.25%.