Inflation in China seems to be easing again, with January’s PPI coming in under expectations. It’s a good signal that monetary support from the People’s Bank of China can continue without having huge impacts on inflation, writes KraneShares in its China Last Night blog.
The PPI for January came in at 9.1% on an expectation of 9.5% and a decrease from December’s 10.3%. CPI came in lower as well, 0.9% on an expected 1.0% and a drop from December’s 1.5%. It’s an indication that while inflation is still high in the country — see the elevated commodity prices — there is beginning to be some easing for inflationary pressures. Food prices saw a reduction in January, helping to bring CPI down and providing some relief to consumers.
The PBOC began monetary easing in January, cutting short- and medium-term lending rates as well as reducing the mortgage lending benchmark rates. The PPI and CPI coming back lower for January indicates that the central bank can continue its easing measures to help support the economy without driving inflation up again.
“China’s monetary policy still has some room for easing in the first half of this year, depending on the policy transmission effect and the growth target set by annual parliamentary meeting in March,” Marco Sun, chief financial analyst at MUFG, told Reuters.
In comparison, the U.S. is being forced to tighten its policy to counteract rising inflation, as are many other countries around the world. CPI in the U.S. was 7.5% in January, and the PPI was 9.7%.
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