Chinese inflation hits seven month low in December

Thursday 09 January 2014 08.46
Chinese inflation dropped to 2.5% last month
Chinese inflation dropped to 2.5% last month

China's annual consumer inflation slowed more sharply than expected to a seven-month low of 2.5% in December.

The drop eased market fears of monetary policy tightening although the central bank is tapping the brakes on bank liquidity.

Rising money market rates and bond yields indicate the People's Bank of China (PBOC) is targeting bank liquidity conditions to reduce debt levels and contain credit growth, but there is little sign of a sharp turnaround in its policy stance.

The central bank has pledged to continue to maintain prudent monetary policy in 2014 and keep reasonable money and credit growth to support the real economy.

The drop in inflation last month, from November's print of 3%, was sharper than a fall to the 2.7% rate expected by the market, slowed by volatile food costs.

Food prices rose 4.1% in December from a year earlier, slowing from November's 5.9% rise, the National Bureau of Statistics said. Month-on-month, consumer prices rose 0.3% compared to the 0.4% expected by economists.

But analysts warn inflation may quicken in coming months as the government pushes market-oriented reforms to liberalise energy and utility prices.

China's inflation was 2.6% over the whole of 2013, well within the government's target limit of 3.5%, the bureau said. Analysts believe the government will also stick with the 3.5% inflation target this year.