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China CPI up 1.4% in February as food costs rise

CHINA’S inflation picked up in February, largely due to the effect of the Chinese New Year, the National Bureau of Statistics said today.

The Consumer Price Index, the main gauge of inflation, expanded 1.4 percent from a year earlier last month, up from the pace of 0.8 percent in January as food prices rebounded during the Chinese New Year holiday.

Yu Qiumei, an economist at the bureau, said seasonal factor was the main reason for the unexpected acceleration of inflation growth.

Liu Ligang, chief economist at Australia & New Zealand Banking Group, said as festival effects have gradually faded, the CPI inflation will likely return to around 1 percent in March.

The deflation risks still reined, Liu said.

The Producer Price Index, the factory-gate measurement of inflation and a harbinger of future CPI reading, fell 4.8 percent in February, down further from the drop of 4.3 percent in the previous month.

“The weak inflation profile suggests that further monetary policy easing will be needed to fight against rising deflation risk,” Liu said. “The easing effort so far has been limited.”

To counter the economic weakness, China’s central bank announced a surprising cut of interest rate on the last day of February, the second time in three months and following a reduction of reserve requirement ratio in early February as the rollout of easing policies sped up.

China lowered its gross domestic product growth target to around 7 percent for this year from around 7.5 percent for 2014, after posting a 7.4 percent increase last year, the slowest in 24 years.


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