The speed and magnitude of monetary policy easing during the past six months or so, including recapitalisations and government guarantees has been unprecedented. The ripple effects have adversely influenced the economic condition of the new industrialising export economies – as we have seen in China and the Far East – as global demand shrinks.
To be sure, oil prices have nearly doubled and some other commodity prices have firmed, but large productivity gains have held unit cost increases to negligible levels. Pricing power is still generally reported to be virtually nonexistent. Moreover, the re-emergence of rising profit margins, after severe problems last fall, indicates cost pressures on prices remain small.