China’s Inflation Rises As Food Costs Surge

The dramatic rise in Chinese food prices since January has renewed concerns about inflation in the Chinese economy. Some speculate that the government may once again decide to raise interest rates in response. From the New York Times:

A double-digit jump in food prices pushed China’s inflation higher in January, adding to pressure on Beijing to cool living costs with more interest rate hikes and other measures.

Consumer prices rose 4.9 percent, driven by a 10.3 percent jump in food costs, data showed Tuesday. That was up from December’s 4.6 percent rate and close to November’s 28-month high of 5.1 percent.

Beijing has hiked interest rates three times since October to cool rapid economic growth and tamp down inflation. But analysts say it needs to do more to curb soaring bank lending while it also tries to increase food supplies to bring down prices.

However, despite the revelation that  there had been a sharp surge in food prices, others believe that these increases were less than expected. From Bloomberg News:

“The driver of the below-consensus reading is the smaller- than-expected increase in food prices,” said Lu Ting, a Hong Kong-based economist with Bank of America Merrill Lynch.

Food prices climbed 10.3 percent last month from a year earlier, according to today’s report, after gaining 9.6 percent in December. Vegetable prices jumped 2 percent, fruit prices surged 35 percent and grain rose 15 percent, according to the statement. Non-food prices rose 2.6 percent from a year earlier.

Inflation has long been an attendant problem to China’s rapid economic growth. Curbing inflation is a key concern for the Chinese government. It has already raised interest rates twice in the past few weeks in an attempt to alleviate inflationary pressures. Read more about recent governmental responses to inflation here.

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