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Dip in CPI may lead to policy easing

(Xinhua)

16:00, November 10, 2011

BEIJING, Nov. 10 (Xinhuanet) -- With China's inflation easing to a five-month low last month, analysts said that the government will have more flexibility in conducting monetary policy as the domestic economy cools and the European debt crisis threatens the country's exports.

The consumer price index (CPI), a main gauge of inflation, edged down to 5.5 percent year-on-year in October from 6.1 percent in September, according to data released by the National Bureau of Statistics on Wednesday.

China's producer price index (PPI), a measure of inflation at the wholesale level, increased 5 percent in October from a year earlier, a 12-month low.

The 0.6-percentage-point fall in CPI was the biggest since February 2009, and it was mainly driven by a decline in food prices.

Analysts said that the easing inflation rate showed that government efforts to curb prices had begun to take effect. They said the CPI figure would give monetary policymakers more room and allow them to "fine tune" tightening measures.

"It is a clear signal that prices are entering a declining cycle and monetary policy has managed to achieve an economic soft landing," said Lu Zhengwei, chief economist of Industrial Bank Co Ltd.

Some economists said that the inflation slowdown reflected a healthy easing, while China's fiscal policy has become more proactive and tentative monetary loosening might also be underway.

The market has speculated that the cooling domestic economy, especially the property sector, combined with weak US recovery and the prospect of a recession in Europe, may prompt a shift in Beijing's policy stance toward monetary easing.

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