China Inflation Eases Further In January

China’s consumer price inflation as well as factory gate inflation moderated further in January, giving space for the central bank to ease its policy to support economic recovery.

Consumer price inflation slowed to 0.9 percent in January from 1.5 percent in December, the National Bureau of Statistics said Wednesday. The rate was forecast to ease to 1.0 percent.

Following a 1.2 percent decrease in December, food prices dropped 3.8 percent due to the sharp 41.6 percent decline in pork prices.

On a monthly basis, consumer prices gained 0.4 percent, slightly slower than the 0.5 percent rise expected by economists.

Core inflation that excludes volatile food and energy prices, remained unchanged again, at 1.2 percent in January.

Another report from the NBS revealed that factory gate inflation came in at 9.1 percent in January, down from 10.3 percent a month ago. This was also weaker than the economists’ forecast of 9.5 percent.

The annual slowdown in producer price inflation was driven by the weakness in coal and steel prices.

Factory gate inflation will probably decline further over the coming months, Sheana Yue, an economist at Capital Economics, said.

Headline inflation is unlikely to breach 2 percent for most of this year, the economist noted. Inflation concerns are unlikely to hold back the PBoC from more policy loosening measures, said Yue.

The economist anticipates further policy rate cuts before the middle of the year.

After cutting the rates on lending facilities by 10 basis points in January, the People’s Bank of China retained its one-year medium term lending facility rate at 2.85 percent this week.

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