However, if this does not happen, the only way of ensuring price stability is to restrict the purchasing power of wages. This requires that price increases for imported goods do not feed into wages and domestic prices. The numbers I have used are of course by way of illustration and should not be related to the current ones.
The point I want to make is that if the growth gap continues between the developed and emerging markets, inflation imported from the latter cannot be ignored. Normally, higher inflation in the rest of the world should be compensated for by an exchange rate appreciation of the domestic currency vis-à-vis the rest of the world.