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Experts: Cooling inflation leaves room for policy adjustments

By Lu Hui (Xinhua)

13:55, November 14, 2011

BEIJING, Nov. 14 (Xinhuanet) – In line with market expectations, China's consumer prices increased 5.5 percent in October from a year earlier, registering the slowest pace in five months as the result of falling food prices and accumulated effects of tightening monetary policies.

The sharp pullback of CPI from July's three-year peak of 6.5 percent showed government's macro-economic control efforts have bore fruits, leaving more room for policy makers to fine tune tightening policies to boost economic growth.

But, does the easing inflation mean it is time to relax the tight monetary policy? Analysts cautioned that China could face resurgent inflationary pressure if it loosens monetary policy too soon and tweaks to fiscal policy may be the preferred way to help an economy feeling the chill of global slowdown.

Inflation turning point comes

China's consumer price index (CPI), the main gauge of inflation, rose 5.5 percent year-on-year in October, according to the data released by the National Bureau of Statistics (NBS) on Wednesday.

Though the October's CPI is still at a high level, the figure marked the slowest surge since May this year, softening from 6.1 percent in September, 6.2 percent in August, 6.5 percent in July and 6.4 percent in June, sending a strong signal that the inflation turning point has come at long last.

The food prices, the driving force behind the price hikes, have seen sharp declines.

Food prices, which account for nearly one third of the basket of goods in the nation's CPI calculation, moved up 11.9 percent in October from a year earlier but dipped 0.2 percent month-on-month, according to the NBS.

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