China's inflation probably held close to an almost
two-year high on food prices, increasing the likelihood of the central bank
raising interest rates.
Consumer prices rose 2.6 percent in January from a year earlier, according to
the median estimate of 22 economists surveyed by Bloomberg News. That would be
down from 2.8 percent in December, the biggest increase since February 2005. The
statistics bureau will release the figures at 10 a.m. on Feb. 14.
"The probability of an interest rate raise in the coming few months has
increased and a second rate hike is also possible this year," said Ma Jun, chief
China economist at Deutsche Bank AG in Hong Kong. Besides accelerating
inflation, he cited concerns over a potential stock market bubble and a rebound
China is trying to prevent the overheating of the world's fourth-biggest
economy, which last year expanded 10.7 percent, the fastest pace since 1995. An
export boom drove a US$177.5 billion trade surplus that is pumping cash into the
Economists surveyed by Bloomberg News last month expect the central bank to
raise interest rates and curb bank lending in the first half. The one-year
benchmark lending rate is 6.12 percent.
Central bank Governor Zhou Xiaochuan is seeking inflation of less than 3
percent this year. Food accounts for a third of the consumer price index.
Corn futures on the Dalian Commodity Exchange jumped 25 percent in 2006 as
soaring demand swallowed a record harvest. The world's most populous nation may
struggle to meet its grain needs as farmland shrinks amid rapid urbanization,
the Ministry of Agriculture said Jan. 26.
"Unless the government has massive food stockpiles to dump on the market that
we are not aware of, we may see prices soar even higher in the months ahead,"
said Carl Weinberg, chief economist at High Frequency Economics Ltd. in New
The inflation figures will be affected by the timing of China's Lunar New
Year holiday which fell partly in January last year. Chinese people buy extra
food for holiday feasts.
M2, the broadest measure of money supply which includes cash and all
deposits, probably grew 16.5 percent in January from a year earlier, the
Bloomberg News survey showed. The central bank will release the figures as early
Producer prices likely rose 3 percent in January from a
year earlier, the survey showed. The statistics bureau will release the figures