The Second Economy of the World Eased the Defilation

• 03.10.2015, 14:31
•  Asia,  World

China’s consumer prices rose faster than economists forecast in February. Lunar New Year holiday pushed up food and transport costs, service companies raised charges as migrant workers went back home. The consumer price index (CPI) climbed 1.4 percent compared from the previous year, Bloomberg reports. The reason is families spending on holidays and traveling. On the other hand producer prices fell 4.8 percent.

The Public Bank of China (PBOC) cut benchmark deposit and lending rates as economy slows. The deposit rate is 2.25 percent and a lending rate is 5.10 from April to June.

Economists and policymakers worry that the risk of deflation is rising for China’s economy, as drag from a property market downturn and widespread factory overcapacity is compounded by an uncertain global outlook and soft commodity prices. Julian Evans-Pritchard of Capital Economics in Singapore wrote: "February's seasonal pick-up in food inflation will likely prove short-lived and we still expect inflation to fall back below 1 percent in coming months". He also added that today's inflation data suggest that downward pressure on broader prices has begun to ease, Reuters reports.

There will be need in the future to fight against rising deflation risk by easing monetary policy. Chinese leaders announced last week an economic growth target of around 7 percent for this year, below the 7.5 percent goal in 2014, as their aim is to reduce the quantity of production and raise the quality. The consumer price index target was set at around 3 percent for this year. Annual consumer inflation was 2 percent in 2014 -  below the government's target of 3.5 percent.