President Roh Moo-hyun of South Korea will meet North Korea's Kim Jong-il in the North's capital, Pyongyang, from 28-30 August, the second-ever summit between the two countries. This follows improvements in North Korea’s ties with the outside world after Pyongyang agreed to disclose details of its nuclear program. The two countries have not signed a formal peace agreement since the end of the 1950-53 Korean War. But after the landmark summit in 2000, political and economic ties between the two Koreas have improved.
Argentina announced it would extend existing price-freeze accords with food suppliers for the rest of the year. The government has been intervening to set the prices of goods and services in the CPI basket, as well as interfering with the estimation of the CPI data. But last week president Nestor Kirchner accused foreign investment banks of manipulating trading in inflation-linked debt, and the country’s antitrust agency has given the local banks 20 working days to provide bond sale information since 2002. (For analysis on the true level of inflation in Argentina, click here).
Venezuela’s president Hugo Chavez stated that the government has purchased Argentine bonds worth $500 million, and reiterated his intention to purchase bonds from Ecuador and Bolivia. Analysts expect that Argentine bonds will soon be sold to Venezuelan local investors as a new issue of the Bono del Sur, a combined Venezuela-Argentina issue under the aegis of the newly established Banco del Sur.
In view of the flood in southern China, the drought in northern China, and meat shortages caused by the spread of blue ear disease, analysts have hiked their July CPI inflation estimates to around 5%. Analysts also expect rising inflation expectations will replace food inflation as the main driver of price hikes in the medium-term and will subsequently lead to monetary tightening measures. (For more on China's overheating risks, please click here)
India announced curbs on external commercial borrowing (ECB). The new norms state that a company can raise up to $20 million dollars through the ECB route after getting the central bank’s approval. But borrowing over $20 million can only be spent overseas. Between April to July, India has received unprecedented dollar inflows through ECB’s amounting to $9 billion. This move is designed to rein in excess liquidity and drive market interest rates up. (For more on how the central bank is struggling to deal with excess liquidity, please click here).