China’s Inflation Quickens in February


China’s inflation accelerated in February, highlighting the risk that stimulus measures will overheat the world’s fastest-growing major economy.

Consumer prices rose 2.7 percent from a year earlier, the National Bureau of Statistics said in Beijing. That compares with 1.5 percent in January. A weeklong holiday may have boosted prices.

Premier Wen Jiabao aims to hold full-year inflation to about 3 percent after banks flooded the financial system with money to drive a rebound from the global recession.

Gross domestic product grew 10.7 percent in the fourth quarter and central bank governor Zhou Xiaochuan said March 6 that anti- crisis policies, including the yuan’s peg to the dollar, must end sooner or later.”

Commodity costs, reforms of China’s energy and resource pricing, and the effects of last year’s expansion of credit may add inflation pressures this year, China’s top planning agency told lawmakers last week.

Producer-price inflation climbed to 5.4 percent in February from 4.3 percent in January, the statistics bureau said today.

The central bank hasn’t raised benchmark interest rates since December 2007, before the financial crisis deepened. The one-year lending rate is at 5.31 percent and deposit rate is at 2.25 percent. China has also effectively pegged the yuan at about 6.83 per dollar since July 2008 to help exporters.

Policy makers are targeting lending of 7.5 trillion yuan, 22 percent less than last year’s actual figure, and pledging to crack down on property speculation. The government has tightened second-home mortgages and banks have scaled back favorable home loan rates.


TradingEconomics.com, Bloomberg
3/10/2010 9:30:02 PM