World business booms

The global private sector economy boomed at its fastest rate in 15
months in October, providing ample fuel for central banks to ratchet
up warnings of rising inflation and the need for higher interest
rates.

Monthly surveys of thousands of companies in the major economies of
North America, Europe and Asia indicated a sharp rebound in activity
last month.

Manufacturers steamed ahead at their fastest rate in 13 months.
Service sector firms signaled they were at full tilt again, aided by a
sharp recovery in the United States after a September stutter caused
by hurricanes and soaring fuel costs.

With activity at full blast and the cost of energy and raw materials
still high, the rising threat of inflation is holding the attention of
increasingly hawkish central banks worldwide.

"Policymakers cannot be complacent," Federal Reserve Vice Chairman
Roger Ferguson told a conference in Washington.

"Central bankers must reinforce their credibility and validate the
confidence of market participants by actively leaning against the
inflationary pressures long before inflation itself builds," he added.

The Fed announced its 12th quarter-percentage-point rate increase
since June last year on Tuesday, bringing its key lending rate up to 4
percent from a starting low of 1 percent.

Financial markets expect even tighter credit as the Fed warned of the
"cumulative" impact of energy price increases.

Earlier in Frankfurt, European Central Bank President Jean-Claude
Trichet also signaled the ECB was closer to raising its key short-term
rates from 2 percent, where they have been for more than two years.

"We can move at any time, and we have warned the market very clearly
of this," Trichet said. "Strong vigilance is of the essence in our
eyes, and we clearly see increased risks to price stability."

"As regards to a pre-emptive strike, any central bank would not
consider it advisable to wait for inflation to materialize," Trichet
added.

Financial futures markets are betting there is a 60 percent chance of
an ECB rate rise as soon as next month.

www.financialexpress.com