Banking News
- Nation could take fresh steps on inflation
Date: 30-Aug-2007 Sources: (Shenzhen Daily)
THE central bank is paying close attention to changes in prices and will take further tightening steps if necessary to keep them in check, deputy central bank governor Su Ning said yesterday.
Annual inflation hit a 10-year high of 5.6 percent in July, propelled by surging food prices, prompting the People's Bank of China last week to raise interest rates for the fourth time this year.
'The central bank will continue to take timely macroeconomic control measures in order to keep prices stable,'Su told a news conference, adding that measures so far had had some impact.
Su said that given the relatively high inflation in the first seven months of the year, the full-year figure would probably exceed the central bank's target of 3 percent.
'Even if we step up control measures now, price rises will still probably be above 3 percent this year,'he said.
Su said that because most of the recent uptick in inflation was on account of food - food prices rose 15.4 percent from a year earlier in July - inflation could be expected to ease if food prices started to moderate.
However, he stopped short of forecasting whether or when that would happen.
However, comments by Ma Kai, head of the National Development and Reform Commission, suggested that at least one reason behind the recent surge in inflation - the price of grain - could show few signs of relief.
Ma told the Standing Committee of the National People's Congress, or parliament, that recent flooding across the country could create 'serious?challenges for the autumn grain harvest, according to the official Xinhua news agency.
Ma said authorities would strengthen their monitoring of prices and step up efforts to crack down on illegal price rises.
Ma Jun, China economist with Deutsche Bank in Hong Kong, said that wholesale price data for agricultural products in August pointed to a rise in inflation to around 6 percent in August.
'This CPI trend obviously further raises the probability of another rate hike in the remainder of this year. We think the likely timing of the next rate hike will be in the second half of September,'he said.
But not all analysts agreed that further rises in inflation were an imminent threat.
Fan Gang, the only academic member of the monetary policy committee under the People's Bank of China, was quoted by the Shanghai Securities News as saying he expected inflation to ease in the fourth quarter, in part because there was no shortage of manufactured goods.
'Current production input prices are stable, and we should not be too pessimistic about consumer inflation,'Fan was quoted as saying. 'The accelerating trend in prices is likely to ease in the fourth quarter.'
In the published comments, Fan gave no outlook for food prices but said the main risk for the world's fourth-largest economy was potential property and stock market bubbles.
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