Worries over inflation flare up, again

08:27, July 01, 2010      

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The central government continues with an emphasis on inflation controls. Analysts said, however, there is little to worry about in the near future, though inflation pressures remain high.

Premier Wen Jiabao again addressed a need for managing inflationary expectations, the central government's official website reported Wednesday.

Wen's speech came just before the release of a major economic indicator, the purchasing managers' index that often predicts inflation trends.

The consumer price index (CPI) hit a 19-month high to 3.1 percent year-on-year in May, breaking the warning limit of 3 percent, according to the National Bureau of Statistics. The producer price index (PPI) reached 7.1 percent in May, the highest level since October 2008.

Market watchers expect the CPI to continue to rise over the next few months.

The CPI is expected to reach a ceiling between July and October, said Lu Zhengwei, a Shanghai-based senior economist with Industrial Bank.

Although food prices have already declined, other goods have gotten more expensive recently, Wang Tao, head of China research at USSecurities, said in a note Tuesday. Inflation expectations remain high, partly because of the rise in property prices and a rebound in wage growth is also likely to lead to inflation, she added.

But analysts said inflation concerns were not serious in months to come. The PPI will decline after hitting a high in May, dampening concerns over inflation, Lu said. Inflation will be around 3 percent for the whole year, he added.

Inflation will be kept contained in the short term, in light of the weak global consumer demand and China's gradual policy tightening, Wang said.

Premier Wen said in his annual work report in March, the credit will be kept under 7.5 trillion yuan ($1.11 trillion) this year, down from record-breaking 10 trillion yuan ($1.47 trillion) in 2009. The country has also released a series of tightening measures to get the housing market under control.

The recently-announced yuan exchange rate reform will also help allay inflation, she pointed out.

Lu warned the country might face serious inflation in the second half of next year, as the global economy will recover, and prices should rise.

Source: Global Times


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