China inflation rate hits new high in February 2013

China’s inflation rate hit a 10-month high in February after Lunar New Year festivities drove up food prices.

Consumer prices rose 3.2% from a year earlier, with food prices up by 6%.

Inflation has been a hot political issue in China. There have been concerns that if consumer prices rise too much, it may prompt Beijing to tighten monetary policies, which in turn may hurt China’s growth.

However, analysts said the latest data was unlikely to prompt any such moves.

They argued that the price growth was driven mainly by the Lunar New Year celebrations, which are traditionally associated with an increase in consumer spending.

“We expect limited market and policy impact as investors and officials understand the Lunar New Year distortions quite well,” Bank of America Merrill Lynch analysts said in a note after the data was released over the weekend.

“Though policymakers should be wary of inflation later this year with economic growth recovery, it’s too early to call for significant monetary tightening at present,” they said.

After years of experiencing a blistering pace of growth, China has seen its economic expansion slow in recent times.

China’s inflation rate hit a 10-month high in February after Lunar New Year festivities drove up food prices

In 2012, China grew at a pace of 7.8%, its weakest performance in 13 years.

Prompted by slowing growth, China has taken various steps over the past months to spur a fresh wave of economic growth.

It cut interest rates twice last year, to bring down the cost of borrowing for consumers and businesses. It also lowered the amount of money that banks need to keep in reserves in an attempt to boost lending in the country.

On the investment front, Beijing approved infrastructure projects worth more than $150 billion.

Some analysts said that if China continues to pursue easy monetary policies, consumer prices may rise further in the latter half of the year.

“If monetary policy remains at the current loose stance, consumer price index in 2013 will likely be much higher than the 3.5% target set in the National People’s Congress,” said Zhang Zhiwei, an economist with Nomura.

China set a target of 3.5% inflation rate for the current year at the National People’s Congress, its annual parliamentary session, last week.

However, in his final appearance at the congress, outgoing Premier Wen Jiabao warned that keeping prices in check will remain a key challenge for the policymakers.

“There are relatively big inflationary pressures this year, mainly because there are pressures on China’s land, labor, agricultural products and services,” Wen Jiabao said.

“And major countries are stepping up loose monetary policy, so we can’t overlook imported inflationary pressures.”

Clyde K. Valle

Clyde is a business graduate interested in writing about latest news in politics and business. He enjoys writing and is about to publish his first book. He’s a pet lover and likes to spend time with family. When the time allows he likes to go fishing waiting for the muse to come.

Recent Posts

Donald Trump and Elon Musk Celebrate Election Victory at UFC 309

Image source: Wikimedia Commons President-elect Donald Trump celebrated his election victory at the Ultimate Fighting…

4 days ago

White House 2024: Donald Trump Wins, Kamala Harris Calls Him to Concede Election

Millions of voters across the US chose to return Donald Trump to the White House…

2 weeks ago

Who Won? Donald Trump Declares Victory as He Addresses Jubilant Supporters in Florida

Donald Trump declares victory in the US election as he addresses jubilant supporters in Florida.…

2 weeks ago

Stocks Soaring as Donald Trump Closes in on US Victory

Stocks around the world are rising as Donald Trump appears to be on the cusp…

2 weeks ago

Who Won? Kamala Harris Cancels Election Night Party as Path to Victory Narrows

Donald Trump has won Pennsylvania, North Carolina and Georgia and taken a lead over Kamala…

2 weeks ago

Quincy Jones Dead at 91

Quincy Jones, the celebrated musician and producer who worked with Michael Jackson, Frank Sinatra, Ray…

2 weeks ago