China inflation keeps policy bias on growth

China’s annual inflation rate jumped more than expected in March to 3.6 percent as food prices remained volatile, but economists believe price pressures will moderate over the rest of year, giving Beijing the flexibility to ease monetary policy to support growth.

Expectations that a cooling economy has eclipsed inflation as the government’s biggest near-term worry were reinforced by surprisingly soft producer prices, which fell 0.3 percent from a year ago, sparking concerns this indicated weakening demand.

Analysts said Monday’s price data suggested China’s inflation is set to moderate rather than slow dramatically in coming months, and that Beijing will likely meet its 2012 inflation target of 4 percent even as it slowly loosens policy.

“Nothing in this (March) number looks like it is pushing me away from the comfortable view that inflation is on a downtrend,” Tim Condon, head of Asian economic research at ING in Singapore, told Reuters.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell