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For years now, globalization has been promoted as way delivering low priced goods and services to consumers. In the United States, for nearly a decade Chinese goods were cheap to purchase because of exporting deflation. However, in the last few months, Chinese imports have become expensive because of imported inflation.
What economists now want to figure out whether one country can import inflation to another. Where China is concerned, it pegs its currency against the US dollar so when there is inflation in the United States, China too see inflation. But if the Yuan inflates, the US does not see the inflation. However, economists are now trying to find out whether a sovereign nation with its independent central bank can import inflation from overseas.
According to former Federal Reserve Chairman Alan Greenspan, relative change in prices does not cause imported inflation per se. For instance, for a given stock of money, rise in oil prices may translate to a one time rise in price level but with over a period of time the price of something else falls as consumers cut back on non-oil purchases.
This same logic is also true for imported inflation. If consumers have to pay more for imported goods and items, they will have less money to spend on domestic goods and services. The Federal Reserve then has to accommodate the higher prices by allowing the money supply in the nation to increase.
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Soaring energy prices is taken the current national rate of inflation in the US to 5.0 percent which in turn resulted in a 1.1 percent increase in consumer prices in the month of June 2008. The United States is seeing the sharpest increase in consumer price index since June 1982 and with a 0.3 percent increase in the core consumer price index, which did not include energy and food, since January 2008. 
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