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.
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Dean Popplewell
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