China's April CPI set to gain but no rate rise yet

   Date:2010/05/07     Source:

CHINA'S consumer prices were likely to rise again in April after natural disasters battered some regions in the country but analysts do not expect an immediate rise in interest rates as the central bank has asked lenders to put aside more reserves.

The Consumer Price Index, the main gauge of inflation, may rise between 2.6 percent and 3 percent from a year earlier in April, some analysts said. The National Bureau of Statistics is set to unveil the CPI next Tuesday.

The expected rate is higher than the increase of 2.4 percent in March and may possibly break the record so far this year of a 2.7 percent rise in February.

"With several natural disasters hitting southwest China and elsewhere in March, consumer prices may pick up again in April," said Dong Xian'an, chief economist at the Industrial Securities Co. He expected prices to gain 2.8 percent in April.

Li Huiyong, an analyst at Shenyin and Wanguo Securities Co, forecast a CPI rise of 2.6 percent.

"Food costs are rising quickly, and are becoming a driving force of the rise in consumer prices," Li said.

Parts of southwest China suffered from the worst drought in more than a century in March, followed by snowstorms in northwest China and an earthquake in Qinghai Province last month.

Despite more inflationary pressures, analysts generally agreed that there would not be an immediate interest rate increase to deal with inflation.

"China has mainly used two key tools to curb liquidity: raising the reserve requirement ratio and engaging in open market operations," said Sun Mingchun, an economist at Nomura International (Hong Kong) Ltd.

Wang Tao, a UBS AG economist, said interest rates won't rise until June at the earliest.


 

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