With the World Bank raising its China inflation projections at roughly the same time Beijing decided to raise oil rates, Reuters’ analysts step out quickly to quash the inevitable pricing panic:
The unpleasant news for motorists on Thursday that their bill at the pumps was going up overnight by as much as 18 percent prompted consternation and anger about the rising cost of living in China.
Economists, however, took the announcement with far greater sangfroid.
Higher resource prices will undoubtedly feed into inflation, but in a nation where consumers spend little on fuel products, the impact will be relatively small. Most economists expect that an extra percentage point, or even less, will be added to consumer inflation over the rest of the year.
A rise in fuel prices is just what the World Bank thinks needs to happen, according to a Market Watch report.
