China said today that inflation moderated slightly in January but remained stubbornly high at 4.9%, and analysts said that meant the government was likely to take further steps to cool prices.
The consumer price index, the key gauge of inflation in the world's second economy, was 'lower than market expectations' according to the National Bureau of Statistics but still above Beijing's 4% full-year target. Economists had predicted an average forecast of 5.4% growth from the same month a year earlier.
The figure, which follows a 4.6% increase in December and a two-year high of 5.1% in November, comes despite three interest rate hikes in four months and several increases in the amount of money banks must keep in reserve to cut lending.
Analysts said that the reading suggested pressure on prices would remain uncomfortably strong for the next few months. They added that they expect to see another 50 basis points of rate hikes and a faster pace of currency appreciation in coming months.
Inflation has become Beijing's top economic concern as it struggles to keep a lid on rising costs of food and other key items to head of public unrest.
The continued high prices came despite an adjustment in the index that lowered the weight of soaring food prices. A separate statement on the statistics bureau's website said the weightings are tweaked annually.
Despite the change, food costs continued to show strong growth in January, with grain prices up 15.1%, the bureau said.
The grain supply situation has become an increasing source of official anxiety as a drought across northern China over the past four months has raised fears that the important winter wheat crop could be severely affected. At the same time, prices of fresh fruit grew 34.8%, the bureau said.
Inflation, particularly related to food, has a history of sparking unrest in China. Today's data did not include property prices, which also have grown sharply over the past year.
