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CPI dip may postpone rate rises
By Zhang Fengming |
April 15, 2010, Thursday
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Online Edition
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CHINESE consumer prices eased more than expected during March, but this may be temporary and interest rate rises are expected later this year, economists said today.
Consumer price index, the main gauge of inflation, dipped to 2.4 percent year on year in March from 2.7 percent in February, official figures showed today.
"The March inflation will bring relief to some and fortifies those arguing against rate hikes in Beijing," said Stephen Green, a Standard Chartered Bank economist.
"But this still means 0.2 percent month-on-month seasonal adjusted inflation, continuing its upward trend. We still think there is need for rate hikes, two hikes of 0.27 percentage points each in the second quarter," Green said.
Rising producer prices are adding pressure on shop prices.
Producer price index registered a 5.9 percent year-on-year rise in March, faster than the 5.4 percent growth in February.
Economists said the moderate March inflation may be short-lived with faster producer prices adding pressure on future end-users.
"Inflation has been on an upward trend over recent months, and with the economy expanding at its strongest pace in nearly three years, inflation pressures are intensifying," said Matthew Circosta, a Moody's Economy.com economist.
Besides, record-gains in property prices are set to boot household wealth, feed into stronger consumer spending and put even more pressure on demand-side inflation.
China's urban property prices rose at a record pace in March. Real estate prices in 70 major cities on the Chinese mainland jumped 11.7 percent, the biggest year-on-year gain since July 2005.
"With the economy expanding at a rapid pace and authorities vowing to cool the property market, policy makers are set to exit from emergency policy setting to restrain consumer prices and asset bubbles," Circosta said.
"Raising interest rates and appreciating the yuan loom as the next tools aimed at keeping inflation and the economy from overheating," he said.
The economy grew strongly in the first quarter to 11.9 percent, up from 10.7 percent in the fourth quarter of 2009.
Banks in China extended 510.7 billion yuan of yuan-backed new loans in March, down from 701 billion yuan in February and 1.39 trillion yuan in January.
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Consumer price index, the main gauge of inflation, dipped to 2.4 percent year on year in March from 2.7 percent in February, official figures showed today.
"The March inflation will bring relief to some and fortifies those arguing against rate hikes in Beijing," said Stephen Green, a Standard Chartered Bank economist.
"But this still means 0.2 percent month-on-month seasonal adjusted inflation, continuing its upward trend. We still think there is need for rate hikes, two hikes of 0.27 percentage points each in the second quarter," Green said.
Rising producer prices are adding pressure on shop prices.
Producer price index registered a 5.9 percent year-on-year rise in March, faster than the 5.4 percent growth in February.
Economists said the moderate March inflation may be short-lived with faster producer prices adding pressure on future end-users.
"Inflation has been on an upward trend over recent months, and with the economy expanding at its strongest pace in nearly three years, inflation pressures are intensifying," said Matthew Circosta, a Moody's Economy.com economist.
Besides, record-gains in property prices are set to boot household wealth, feed into stronger consumer spending and put even more pressure on demand-side inflation.
China's urban property prices rose at a record pace in March. Real estate prices in 70 major cities on the Chinese mainland jumped 11.7 percent, the biggest year-on-year gain since July 2005.
"With the economy expanding at a rapid pace and authorities vowing to cool the property market, policy makers are set to exit from emergency policy setting to restrain consumer prices and asset bubbles," Circosta said.
"Raising interest rates and appreciating the yuan loom as the next tools aimed at keeping inflation and the economy from overheating," he said.
The economy grew strongly in the first quarter to 11.9 percent, up from 10.7 percent in the fourth quarter of 2009.
Banks in China extended 510.7 billion yuan of yuan-backed new loans in March, down from 701 billion yuan in February and 1.39 trillion yuan in January.
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