Wednesday, March 14, 2007

China inflation up on higher food prices

by Elaine Frei

Higher prices on food sent consumer prices up 2.7 percent in China in February, according to the official statistical arm of the government there.  The rise came after a gain of 2.2 percent in January.  Analysts said that the rise in food prices, were likely driven by global conditions and were consequently something that China has little control over.  This statement accompanied analyst sentiment that there is no need for a rise in interest rates.

Most analysts feel, in any case, that Chinese inflation will slow down as the year progresses.  The main concern is that with low banking interest rates, rather than keep money in the bank many people could instead invest in property or stocks with the risk that an asset bubble could develop.  In that case, if inflation remains high, then an interest rate hike might be needed.

Food prices in China were up by 6 percent in February, compared to the same time last year.  One of the main reasons for the increase is a jump in grain prices worldwide which has been raising food prices elsewhere, as well.  Prices on clothing and durable goods were also up in China, but non-food inflation there remained at 1 percent in February.

 

 

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