China said yesterday that consumer prices rose at their fastest in more than two years last month, raising expectations of another rate hike as Beijing admits it may not meet its inflation target for this year.
The consumer price index — or CPI, a key measure of inflation — rose 4.4 percent year-on-year last month, compared with 3.6 percent in September, the National Bureau of Statistics (NBS) said.
It was the fastest pace since September 2008 — the start of the global financial crisis, when consumer prices rose 4.6 percent.
Photo: REUTERS
Consumer prices increased 0.7 percent month-on-month.
The figure for last month, which outstripped several analysts’ predictions, comes as the world’s second-largest economy battles to rein in consumer prices and soaring housing costs.
Over the first 10 months of the year, the CPI was up 3 percent, mainly driven by rising food prices and living costs, NBS spokesman Sheng Laiyun (盛來運) told a news conference.
“Price pressures are increasing. That means pressure on macro-economic controls is increasing,” Sheng said.
The CPI reading for last month marked a “very sharp increase” and persistent upward pressures on prices meant any dip in the coming months would be shallow and short-lived, said Brian Jackson, a senior strategist at Royal Bank of Canada.
“It’s obviously eye-catching ... There are some reasons to think it might pull back in the next couple of months but I wouldn’t want to bet the house on that,” Jackson said.
“More rate hikes are clearly on the way, and today’s data also reinforces the case for faster currency appreciation,” he added in a note.
The People’s Bank of China last month raised its benchmark one-year lending and deposit rates by 25 basis points each — the first hike in nearly three years.
Late on Wednesday, the central bank tightened liquidity by ordering banks to set aside more reserves for the fourth time this year.
New lending last month fell slightly from the previous month to 587.7 billion yuan (US$88.6 billion), the central bank said yesterday.
“What we are really seeing is stable growth being supported by continued high levels of lending,” said Tom Orlik, a Beijing-based economist with Stone and McCarthy Research Associates. “The real question is when they turn the lending tap off, what happens to the growth? We don’t know the answer to that.”
China’s battle to restrain prices comes amid worries that the US Federal Reserve’s move to inject US$600 billion into the US economy could increase speculative “hot” money flows into China and fuel inflation.
“The new round of foreign quantitative easing policy will release enormous liquidity, which will have a rather significant impact on the Chinese economy,” Sheng told reporters.
The Fed measures were expected to fuel inflation in China, he said, adding: “We will have to make greater efforts in order to reach the full-year inflation target.”
The head of China’s top economic planning agency, National Development and Reform Commission chief Zhang Ping (張平), warned earlier this week that the full-year CPI would exceed the government’s 3 percent target.
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