By Agency Reporter

Wednesday, 15 Dec 2010

Inflation in China has risen to a 28-month high, sparking warnings of new interest rate rises, the British Broadcasting Corporation reported on Tuesday.

The inflation rate, measured by the consumer price index, rose 5.1 per cent year-on-year in November, an increase that was above market expectations.

Last Friday, China had reported much stronger than expected export growth in November, adding to inflation fears.

Inflation has in the past caused unrest in China, where poor families spend up to half their incomes on food.

The government has said it will take strong action against anyone found to be manipulating food prices.

It has taken a number of measures to try to tighten its monetary policy and boost the supply of key goods.

In October, the central bank announced the first interest rate rise in nearly three years and analysts say another may be needed.

An economist with Mizuho Securities, Mr. Shen Jianguang told Reuters news agency, ”At least one interest rate rise is needed for this year. If you see inflation but no rate hike, people will doubt the determination to fight inflation.”

The 5.1 per cent November rise was the biggest since June 2008, and follows a sharp hike on the October rate of 4.4 per cent. The government‘s full-year target is three per cent.

NBS’ spokesman, Mr. Sheng Laiyun told the Agence France Presse agency, ”Price rises in November are beyond many people‘s expectations. It will take some time for the anti-inflationary policies to be implemented and show clear effects.”

China implemented a $586bn stimulus package two years ago which many analysts believe was the catalyst for the inflation rises.

 

Source: Punch