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Rising inflationary pressure may lead to tighter monetary policy, analysts say
By Wang Yanlin |
March 7, 2013, Thursday
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Online Edition
Online Edition
CHINA may tighten monetary policy this month in response to rising inflationary pressure, analysts said before key economic data for January and February are released this weekend.
The Consumer Price Index, the main gauge of inflation, is expected to rebound to around 3.2 percent in February, up from 2 percent in January and 2.5 percent in December, said Lu Zhengwei, chief economist at Industrial Bank.
"The increase is driven by much higher food prices during the Spring Festival holiday," Lu said. "But even if the increase is mainly due to seasonal factors, such a sharp increase will induce worries on inflation."
Tang Jianwei, an analyst with Bank of Communications, was a bit more conservative but still forecast an inflation rate of 2.9 percent for February.
"China has entered another phase of accelerating inflation with stabilizing domestic demand, higher labor costs and rising pork prices," Tang said. He said he expected the CPI to average between 3 and 3.5 percent this year.
China wants to control inflation at or below 3.5 percent this year, Premier Wen Jiabao said in a government work report earlier this week at the ongoing National People's Congress. The goal was lower than 2012's 4 percent target, but higher than the final rate of 2.6 percent last year.
Wen said inflationary pressure remains high due to rising land and labor costs, and it may be exacerbated by increasingly looser monetary policies adopted by major global economies.
Meanwhile, analysts projected faster growth in China's industrial production, fixed-asset investment and retail sales. The data for January and February will be combined to eliminate the effects of the Spring Festival holiday.
Chang Jian, an economist at Barclays, said inflation and activity numbers may add to recent market concerns about the risk of further policy tightening.
"The monetary stance has already returned to neutral," Chang said. "We expect the central bank to continue to actively use repurchase agreements and reverse repurchase agreements to manage liquidity amid strong capital flows and to control credit growth."
The Consumer Price Index, the main gauge of inflation, is expected to rebound to around 3.2 percent in February, up from 2 percent in January and 2.5 percent in December, said Lu Zhengwei, chief economist at Industrial Bank.
"The increase is driven by much higher food prices during the Spring Festival holiday," Lu said. "But even if the increase is mainly due to seasonal factors, such a sharp increase will induce worries on inflation."
Tang Jianwei, an analyst with Bank of Communications, was a bit more conservative but still forecast an inflation rate of 2.9 percent for February.
"China has entered another phase of accelerating inflation with stabilizing domestic demand, higher labor costs and rising pork prices," Tang said. He said he expected the CPI to average between 3 and 3.5 percent this year.
China wants to control inflation at or below 3.5 percent this year, Premier Wen Jiabao said in a government work report earlier this week at the ongoing National People's Congress. The goal was lower than 2012's 4 percent target, but higher than the final rate of 2.6 percent last year.
Wen said inflationary pressure remains high due to rising land and labor costs, and it may be exacerbated by increasingly looser monetary policies adopted by major global economies.
Meanwhile, analysts projected faster growth in China's industrial production, fixed-asset investment and retail sales. The data for January and February will be combined to eliminate the effects of the Spring Festival holiday.
Chang Jian, an economist at Barclays, said inflation and activity numbers may add to recent market concerns about the risk of further policy tightening.
"The monetary stance has already returned to neutral," Chang said. "We expect the central bank to continue to actively use repurchase agreements and reverse repurchase agreements to manage liquidity amid strong capital flows and to control credit growth."
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