The build up of inflation in the countries like India, Brazil and china have created quite a concern for the central banks of other countries that includes the federal bank. Adding to this risk is the assumption that the central banks of these countries are not well equipped to fight such price rise and the after effect could be severe on the West.

The World Economic Forum that welcomed the central bankers, business executives, political leaders and economists held at Davos in Switzerland wrapped up on Sunday with discussions primarily held on deciding the best possible way to fight the demon of rising prices.

The increasing demand in the newly emerged markets can initiate a rise in the prices of commodities that includes oil, food, grains and other similar consumer goods which could prove temporary and isolated in the mean time but there are fears among the central banks that the rising of prices could persist thus causing price rise in a broad range of consumer goods.

The central banks are also worrying a possible inflation in the food and gasoline prices and in turn could shift the expectations of the households in US or Europe. The experience of a little inflation might make the consumer expect more inflation as they see prices soaring up in grocery stores and gas stations. This shift can prove to be the main reason that fulfills the common prophecy of inflation and the result will be more rises in prices.

The above situation can create massive confusion. If the west begins to witness inflation the most probable step that should to be taken by the central banks over there in arise in the interest rates that would lower the supply of money in the hands of the purchaser in an effort to curb the rising demand. But then this is one step that the western central banks want to avoid as their own economies are yet to recover completely for the financial meltdown.