China's Inflation Rate Jumps to Highest in 10 Years

Inflation in China, the world's fastest-growing major economy, accelerated to the highest rate in more than 10 years, fueling speculation that the government may raise borrowing costs for a fourth time in 2007.

Consumer prices jumped 5.6 percent in July from a year earlier, after gaining 4.4 percent in June, the National Bureau of Statistics said today. That beat the 4.6 percent median estimate of 17 economists surveyed by Bloomberg News.

Food costs climbed 15.4 percent after a shortage of pigs pushed up meat prices and bad weather destroyed crops. The central bank is concerned that food inflation will spread, overheating an economy forecast to contribute more to global growth than the U.S. this year.

``It's still mainly a food-price phenomenon, but the central bank will continue to be worried,'' said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong. ``We expect another interest-rate hike this year and one more increase in the reserve ratio for banks.''

The yield on the benchmark 10-year government bond rose 0.03 percentage point to 4.34 percent at 3:27 p.m. in Shanghai. The benchmark CSI 300 Index of stocks closed 0.1 percent lower.

The official China Securities Journal said last week that the inflation rate would probably be 5.6 percent, citing unidentified people. The central bank said on Aug. 8 that consumer-price gains aren't solely from ``temporary factors.''


8/13/2007 7:47:02 AM