Focus needed on fighting inflation: Bank Julius Baer

V Anantha Nageswaran, Head of Investment Research at Bank Julius Baer believes that from a macro perspective the main problem world over is rise in commodity prices and the impact on inflation.

Speaking to CNBC-TV18 he said there is still far too much focus on maintaining growth and not fighting inflation. I don’t think we are yet in a situation, where there is a trade off between growth and inflation says he.

Excerpts from CNBC-TV18's exclusive interview with V Anantha Nageswaran:

Q: The key concern for China seems to be the inflation numbers right now?

A: That’s right. I think the main problem world over from the macro perspective is the rise in commodity prices and the impact on inflation .I think the markets are going to reward those countries eventually, that deal with it decisively and also in a structurally sustainable manner.

But both China and India at this point in time are not exactly dealing with it in a sustainable manner but they are resorting to more adhoc measures, hoping that as a global economy slows and US demand slows the second half will see a drop in commodity prices but that suggest more hope and complacency rather than pro-activeness. So that paradoxically increases the inflation risk and that is the problem for the markets now.

Q: How much of a diffuse do you see to the other economies and how much of that inflation do you see exported to other economies, and what’s your focus on India?

A: I see it being exported quite globally by the United States because of their policies, which are quite reflationary and given its global reserve currency status, so whatever the US does other countries are forced to follow because they don’t want their currencies to appreciate too much.

There is still far too much focus on maintaining growth and not fighting inflation but I don’t think we are yet in a situation, where there is a trade off between growth and inflation. In other words if we tolerate higher inflation we can get more growth  but I think we have crossed that phase and fighting inflation is a better way of preserving growth at this point of time because inflation rates have gone well beyond this growth inflation trade off.