Chinese inflation in May increased at the fastest pace in four months on higher food prices. According to the state statistics bureau, consumer prices climbed 2.5 percent year-over-year. Economists were forecasting an increase from 1.8 percent in April to 2.4 percent, a tenth-percent lower than the actual print.
The Chinese government has an inflation target of 3.5 percent, which would lead many to believe there is room for additional monetary easing from the central bank, the People’s Bank of China (PBOC). Food prices jumped 4.1 percent, and non-food costs increased 1.7 percent. The producer-price index fell 1.4 percent in May, following a two percent decline in the previous month.
Lu Ting, head of greater China economics at Bank of America in Hong Kong, said [higher consumer prices] won’t impact the scale and pace of the ongoing mini-stimulus.” Lu forecasts consumer prices to stick near 2.5 percent for the next several months.
The PBOC said in a statement, “the PBOC will continue implementing a prudent monetary policy, keep appropriate liquidity, achieve reasonable and appropriate growth in money, credit and aggregate financing, and promote healthy and stable economic operations.”