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Surprise inflation jump dashes monetary easing hopes
By Wang Yanlin |
February 9, 2012, Thursday
|
Online Edition
Online Edition
CHINA'S inflation rebounded unexpectedly in January mainly due to higher food prices during the Spring Festival, denting hopes of easing monetary policies anytime soon.
Consumer Price Index, the main gauge of inflation, expanded 4.5 percent from a year earlier last month, up from the rate of 4.1 percent in December, the National Bureau of Statistics said today.
Food costs, which accounted for nearly one third in the basket, climbed 10.5 percent annually, picking up further from December's 9.1 percent and November's 8.8 percent.
It was the biggest driver of last month's CPI growth through contributing 3.29 percentage points in it.
"The outcome is quite contrary to market expectations which predicted inflation would continue to moderate," said Liu Ligang, an economist at Australia and New Zealand Banking Group. "The result may delay certain easing moves, like a reserve requirement ratio cut, due to the possible rebound in inflationary pressure."
China yesterday raised fuel prices by more than 3 percent, and commodity prices on the global market are also rising noticeably in recent months, which could bolster inflation in China, Liu said.
Wang Tao, an economist at UBS, said the spike in the CPI would make policy makers more cautious about sending monetary easing signals in the short term.
"The market should not expect any RRR cuts as a signal for easing in the next few weeks," Wang said. "Moreover, it is still difficult to discern the real strength of the economy at the current stage."
China's gross domestic product growth weakened to 8.9 percent in the final quarter of last year, the slowest pace in two and a half years that made some economists call for more supportive policies.
However, Wang with UBS said fundamentally, the downward trend of inflation has not been altered, and the continued drop in factory-gate prices also pointed to the absence of upstream pressures.
The Producer Price Index, which measures inflation at the factory gate, expanded 0.7 percent year on year in January, compared with 1.7 percent in December.
China's CPI settled at an annualized 5.4 percent in 2011, far above the 4 percent target. Economists expected the rate may contain itself at around 4 percent this year.
Consumer Price Index, the main gauge of inflation, expanded 4.5 percent from a year earlier last month, up from the rate of 4.1 percent in December, the National Bureau of Statistics said today.
Food costs, which accounted for nearly one third in the basket, climbed 10.5 percent annually, picking up further from December's 9.1 percent and November's 8.8 percent.
It was the biggest driver of last month's CPI growth through contributing 3.29 percentage points in it.
"The outcome is quite contrary to market expectations which predicted inflation would continue to moderate," said Liu Ligang, an economist at Australia and New Zealand Banking Group. "The result may delay certain easing moves, like a reserve requirement ratio cut, due to the possible rebound in inflationary pressure."
China yesterday raised fuel prices by more than 3 percent, and commodity prices on the global market are also rising noticeably in recent months, which could bolster inflation in China, Liu said.
Wang Tao, an economist at UBS, said the spike in the CPI would make policy makers more cautious about sending monetary easing signals in the short term.
"The market should not expect any RRR cuts as a signal for easing in the next few weeks," Wang said. "Moreover, it is still difficult to discern the real strength of the economy at the current stage."
China's gross domestic product growth weakened to 8.9 percent in the final quarter of last year, the slowest pace in two and a half years that made some economists call for more supportive policies.
However, Wang with UBS said fundamentally, the downward trend of inflation has not been altered, and the continued drop in factory-gate prices also pointed to the absence of upstream pressures.
The Producer Price Index, which measures inflation at the factory gate, expanded 0.7 percent year on year in January, compared with 1.7 percent in December.
China's CPI settled at an annualized 5.4 percent in 2011, far above the 4 percent target. Economists expected the rate may contain itself at around 4 percent this year.
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