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Inflation picks up to multi-year highs in China as cbank eyes tighter policy

Inflation picks up to multi-year highs in China as cbank eyes tighter policy

BEIJING: China’s producer price inflation picked up more than expected in January to near six-year highs as prices of steel and other raw materials extended a torrid rally, adding to views that global manufacturing activity is building momentum. China consumer inflation also rose more than expected, nearing a three-year high as fuel and food prices jumped, data showed on Tuesday.Much of the pick up in consumer prices was likely due to higher food and travel costs heading into the long Lunar New Year holiday, the National Bureau of Statistics (NBS) said. But mounting price pressures in China and many other countries have sparked talk of tighter monetary policy this year, after years of super-loose settings aimed at reviving economic growth.

China’s central bank raised short-term interest rates in recent weeks as it looks to contain risks from an explosive growth in debt, while India’s central bank last week unexpectedly signaled an end to its longest easing cycle since the global financial crisis, citing inflation risks. Some analysts, however, believe the ramp up in price pressures in China may be short-lived, noting that a jump in January food prices was likely seasonal and that producer price gains slowed by half on a month-on-month basis. “We don’t expect such high rates of inflation to last,” Capital Economics China economist Julian Evans-Pritchard said in a note. “Tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium-term,” he added, noting that weak prices early last year may have exaggerated the strength of a reflationary trend seen in recent months. Consumer inflation quickened to 2.5 percent in January from a year earlier, the highest since May 2014.