Inflation hovers high at 4.9% in February

10:51, March 11, 2011      

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China's government has faced a daunting job to rein in inflation, as the National Bureau of Statistics reported Friday that consumer prices rose persistently in February despite Beijing's rammed-up efforts to control credit supply.

The bureau reported that consumer price index (CPI), a major gauge of inflation, rose 4.9 percent in February year-on-year, exceeding the widely predicted 4.8 percent by economists, as prices of food, housing rentals and service charges kept surging higher.
Meanwhile, the producer price index (PPI), a measure of industrial inflation at the gate of manufacturers, soared 7.2 percent year-on-year in February – compared with 6.7 percent rise in January. Analysts say the staggering industrial price rises will translate to CPI growths in the coming months.

The stubbornly high inflation rate for February is going to weigh on the decision-makers in Beijing who have faced increasing pressure from the people to control prices. The People's Bank of China, the central bank, is expected to order another rise in commercial banks' reserve requirement ratio (RRR) soon. Since the beginning of 2010, it has raised the ratios seven times, by 50 basic points apiece, to mop up excess liquidity.

Some analysts anticipate that the central bank could ratchet up monetary tightening, by raising the interest rates. It raised the benchmark 12-month deposit rate by 25 basic points to 3 percent, early last month.

Premier Wen Jiabao, in his government work report to the Naitonal People's Congress on Saturday, put the goal of controlling this year's annual inflation rate at below 4 percent, a target Chinese economists say could be elusive, if the government does not act seriously.

Beijing is expected to announce new initiatives to increase supply of staple foods, including grain, vegetables, meat and fruits to meet market demand. The statistical bureau said prices of food jumped 11 percent in February, followed by 6.1 percent price rise in urban housing rentals.

China's stock markets dropped Thursday as investors were spooked by the possible tightening measures from Beijing. The Shanghai stock composite index dropped 45 points, or 1.5 percent, closing at 2957.14 points.

People's Daily Online
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