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Experts: Cooling inflation leaves room for policy adjustments (4)

By Lu Hui (Xinhua)

14:03, November 14, 2011

Inflation pressure still remains

Although CPI fell sharply, consumers are still burdened by the high prices, experts agreed that the current inflation pressure is still high as CPI still stayed at a high level compared to the government's annual target of 4 percent., therefore we should not lower vigilance.

Analysts said that the carryover effect is expected to weaken dramatically to zero in December, pulling down the CPI for the following two months. But the fallback of carryover effect is a technical issue, which does not represent real price fall.

"There is no reason to be over-optimistic, as the prices are still at high level. CPI still rises on a month-on-month basis though declined year on year, partially due to fading carryover effect," said Wang Qun from China international Economic Communication Center.

Wang explained that the falling food prices may have the possibility of rebound given the huge money supply and high inflation pressure.

In winter, pork consumption enters a peak season. Besides, demand for all kinds of consumer products will increase with the arrival of the New Year Day and Spring Festival at the end of the year, which may push prices up.

The inflation pressure will remain due to a large outstanding broad money supply (M2), said Zhang Liqun, a macroeconomic researcher with the Development Research Center of the State Council.

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