Inflation rises to 5.5%, 34-month high

14:51, June 14, 2011      

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Inflation accelerated in May to a 34-month high of 5.5 percent, the National Bureau of Statistics said Tuesday, supporting the case for a continuous tightening in China's monetary policy.

"Inflation pressures remain large," Sheng Laiyun, a bureau spokesman told a news conference.

However, as the economies of other major players have shown signs of weakening, policymakers in Beijing are expected to take time to see a clearer picture before raising interest rates, analysts say.

China's money growth slowed to a 30-month low in May and banks extended fewer new loans than expected, data released on Monday showed.

"Inflation is quite persistent, while economic growth remains resilient, so basically we don't see any reason to pause tightening," said Wei Yao, an economist at Societe Generale in Hong Kong. "We think that a June interest rate hike is still on the cards."

Producer prices in May rose 6.8 percent from a year earlier, which means inflationary pressure would keep building up in the coming months.

The People's Bank of China, the central bank, has already raised banks' required reserve ratios eight times and lifted interest rates four times since October to quell inflation. The one-year lending rate is 6.31 percent and one-year deposit rate is 3.25 percent.

The National Statistics bureau said the steep consumer price rise in May was driven by an 11.7 percent jump in food costs.

Industrial output rose 13.3 percent in May, the statistics bureau reported, while investments in construction, factory equipment and other fixed assets rose 25.8 percent.

By People's Daily Online
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