Tamer CPI but 2 rate rises possible
By Zhang Fengming |
April 16, 2010, Friday
|
Print Edition
Print Edition
A tamer inflation in March may hold off an immediate increase in interest rates but signs of overheating still call for two rate hikes this quarter, economists said yesterday.
Chinese consumer prices moderated more than expected in March, but this may be a temporary phenomenon, they said.
The Consumer Price Index, the main gauge of inflation, rose to 2.4 percent year on year in March compared with a 2.7 percent climb in February.
"The March inflation will bring relief to some and fortify those arguing against rate hikes," said Stephen Green, a Standard Chartered Bank economist. "But this still means 0.2 percent month on month seasonal adjusted inflation, continuing its upward trend."
The Producer Price Index registered a 5.9 percent annual rise in March, faster than the 5.4 percent growth in February. Economists said the moderate March inflation may be short-lived with faster producer prices adding pressure on future end-users.
"Inflation has been on an upward trend in recent months, and with the economy expanding at its strongest pace in nearly three years, inflation pressures are intensifying," said Matthew Circosta, a Moody's Economy.com economist.
Meanwhile, China's urban property prices rose at a record pace in March. Real estate prices in 70 major cities on the Chinese mainland jumped 11.7 percent, the biggest year-on-year gain since July 2005.
"With the economy expanding at a rapid pace and authorities vowing to cool the property market, policy makers are set to restrain consumer prices and asset bubbles," Circosta said. "Raising interest rates and appreciating the yuan loom as the next tools aimed at curbing inflation and the economy from overheating."
Green said that "there is a need for rate hikes, two hikes of 0.27 percentage point each in the second quarter."
China cut its interest rates five times in 2008 amid the global financial crisis but kept them untouched since 2009.
The one-year lending rate is 5.31 percent, and the one-year deposits rate is 2.25 percent, meaning that inflation more than that leads to a negative savings rate.
Chinese consumer prices moderated more than expected in March, but this may be a temporary phenomenon, they said.
The Consumer Price Index, the main gauge of inflation, rose to 2.4 percent year on year in March compared with a 2.7 percent climb in February.
"The March inflation will bring relief to some and fortify those arguing against rate hikes," said Stephen Green, a Standard Chartered Bank economist. "But this still means 0.2 percent month on month seasonal adjusted inflation, continuing its upward trend."
The Producer Price Index registered a 5.9 percent annual rise in March, faster than the 5.4 percent growth in February. Economists said the moderate March inflation may be short-lived with faster producer prices adding pressure on future end-users.
"Inflation has been on an upward trend in recent months, and with the economy expanding at its strongest pace in nearly three years, inflation pressures are intensifying," said Matthew Circosta, a Moody's Economy.com economist.
Meanwhile, China's urban property prices rose at a record pace in March. Real estate prices in 70 major cities on the Chinese mainland jumped 11.7 percent, the biggest year-on-year gain since July 2005.
"With the economy expanding at a rapid pace and authorities vowing to cool the property market, policy makers are set to restrain consumer prices and asset bubbles," Circosta said. "Raising interest rates and appreciating the yuan loom as the next tools aimed at curbing inflation and the economy from overheating."
Green said that "there is a need for rate hikes, two hikes of 0.27 percentage point each in the second quarter."
China cut its interest rates five times in 2008 amid the global financial crisis but kept them untouched since 2009.
The one-year lending rate is 5.31 percent, and the one-year deposits rate is 2.25 percent, meaning that inflation more than that leads to a negative savings rate.
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