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China’s December inflation remains subdued at 1.5%
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China's consumer prices growth picked up unexpectedly in December, but it remained subdued and wrapped up last year with a rate well under the official target.
The Consumer Price Index, the main gauge of inflation, expanded 1.5 percent from a year earlier last month, according to the National Bureau of Statistics today.
It was up from the pace of 1.4 percent in November and landed the inflation of 2014 at 2 percent, much lower than the government target of 3.5 percent.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said China's CPI inflation remained subdued.
"We believe the authorities need to be vigilant against the rising risk of deflation," Zhou said. "In addition to monetary policy response, this could be a good opportunity to push forward the price reform of water, energy and utility."
As evidence of growing deflationary pressure, China's Producer Price Index, the factory-gate measurement of inflation and a harbinger of future prices at the consumer end, dropped 3.3 percent year on year in December, compared with the fall of 2.7 percent in November.
"Chinese authorities will need to use both structural reform measures as well as monetary policy tools to head off the risk of deflation, especially when domestic demand remains weak and commodity and energy prices continue to fall," Zhou said. "We therefore believe that more monetary easing measures, including reserve requirement ratio cuts, can be expected in the first quarter of 2015."
To support growth, the People's Bank of China has reduced the benchmark interest rates for the first time in more than two years in November, following easier policies that loosened restrictions imposed on real estate transactions.
China's gross domestic product grew 7.3 percent from a year earlier in the third quarter, the slowest pace in more than five years led by corrections in the property sector.
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