CPI rises 2.7% in Feb, rate hike likely

10:16, March 11, 2010      

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Inflation has raised its ugly head in February, as the nation’s statistics bureau reported Thursday that the consumer price index (CPI) rose 2.7 percent in the month, the highest in more than 16 months.

CPI, a major gauge of inflation, spiked as a result of a flooding of 9.59 trillion yuan of fresh credit which China’s banks issued in 2009, and a proactive fiscal spending policy taken by Beijing to stave off the negative impact of the global financial crisis and severe economic slowdown.

The sudden jump of inflation is likely to force the central bank, the People’s Bank of China, to raise the benchmark interest rate by 27 basic points in a short time, analysts said.

And, PPI, or producer price index recording inflation at the gate of factories, jumped by 5.4 percent in February, the bureau reported.

China’s economy has stepped out of the global recession in the middle of 2009. The nation’s GDP growth rate at the October-December quarter skyrocketed an impressive 10.7 percent, jerking up demands for all kinds of commodities including crude oil, iron ore, copper and other items.

Premier Wen Jiabao said earlier that his government will try to manage inflation expectations in 2010, as various cabinet departments are now engaged in a joint move to cool down the run-away housing prices and curb bank lending. Wen promised in his government work report to the lawmakers last week that Beijing will aim at an inflation level below 3 percent this year.

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