Slower rise in CPI allows looser policies
By Wang Yanlin |
July 5, 2012, Thursday
|
Print Edition
Print Edition
CHINA'S inflation rate may rise by less than 3 percent in June for the first time in two years, allowing the government more room to ease policies, analysts said.
They predicted China's economy to bottom out in the third quarter after the current stimulus measures filter through, and policymakers may cut the bank reserve requirement ratio one more time this month to encourage growth.
"We are probably at the bottom of a U-shaped growth model," said Lu Zhengwei, chief economist at Industrial Bank. "The government is likely to unleash another set of mild policies to sustain growth, and the recovery is likely to be mild, too."
Lu is more optimistic than other economists by predicting China's inflation growth rate will ease to 2.2 percent in June, the lowest in three years. Other forecasts ranged from 2.4 percent to 2.9 percent rise in inflation.
The Consumer Price Index, the main gauge of inflation, rose 3 percent in May from a year earlier, the slowest in 23 months, due to cheaper food.
"The same reason will assist inflation to ease more steeply in June," Lu said, adding the non-food sectors may also report lower prices last month.
Tang Jianwei, an economist at Bank of Communications, forecast a rise of 2.4 percent in June's CPI.
"Slower inflation growth will make it easier to unveil looser policies, such as another cut in reserve requirement ratio or interest rate," Tang said.
China's gross domestic product grew 8.1 percent from a year earlier in the first quarter, the slowest in nearly three years. Lu said the growth may weaken to 7.9 percent in the second quarter, while other economists predicted it may fall below 7.5 percent.
China is due to unveil a host of economic data next week.
They predicted China's economy to bottom out in the third quarter after the current stimulus measures filter through, and policymakers may cut the bank reserve requirement ratio one more time this month to encourage growth.
"We are probably at the bottom of a U-shaped growth model," said Lu Zhengwei, chief economist at Industrial Bank. "The government is likely to unleash another set of mild policies to sustain growth, and the recovery is likely to be mild, too."
Lu is more optimistic than other economists by predicting China's inflation growth rate will ease to 2.2 percent in June, the lowest in three years. Other forecasts ranged from 2.4 percent to 2.9 percent rise in inflation.
The Consumer Price Index, the main gauge of inflation, rose 3 percent in May from a year earlier, the slowest in 23 months, due to cheaper food.
"The same reason will assist inflation to ease more steeply in June," Lu said, adding the non-food sectors may also report lower prices last month.
Tang Jianwei, an economist at Bank of Communications, forecast a rise of 2.4 percent in June's CPI.
"Slower inflation growth will make it easier to unveil looser policies, such as another cut in reserve requirement ratio or interest rate," Tang said.
China's gross domestic product grew 8.1 percent from a year earlier in the first quarter, the slowest in nearly three years. Lu said the growth may weaken to 7.9 percent in the second quarter, while other economists predicted it may fall below 7.5 percent.
China is due to unveil a host of economic data next week.
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