Those countries that were tough in combating inflation once, are now picking up its fruits. Brazil, Chile, Hungary, New Zealand, Norway, Peru and South Korea started to tighten monetary policy in 2021, many months ahead of the Federal Reserve and the European Central Bank. In economic circles they are cited as Hikelandia. That is a combination of Hike (referring to rate hikes) and Landia (land). The aggressive act of central bankers in those countries had its own critics. They said that increasing lending cost will discourage companies to invest more and hire more. This eventually will turn into high unemployment and recession. But the central banks continue their policy to cool down the economy and curb inflation.
The inflation is still fairly high. But the downtrend is fast in the recent months as you can see in the chart. Now their central banks are getting in front of the rest of the world in a new way, by cutting the rates. Chile’s central bank has already reduced interest rates by 3 percent. Neither Fed nor ECB has not moved to lower the rates. Conversely, at this stage the lowering interest rates are helping their economic growth.
Of course not all Hikelandian countries are witnessing a harsh decline in inflation. In Norway, annual “core” inflation, that is all items excluding foods and energy, is running at 6 percent, that is only 1 percent below its peak. Peru is also suffering from sticky core inflation. But, elsewhere the price growth is easing fast. Core inflation in Hungary has fallen 15 percent from the beginning of 2023. Poland and South Korea are also witnessing the same trend.
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Source: Economist
