China’s Inflation Rises to Seven-Year High as Pork Prices Soar

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China’s Inflation Rises to Seven-Year High as Pork Prices Soar(Bloomberg) -- China’s consumer inflation rose to a seven-year high last month on the back of rising pork prices.The consumer price index rose 3.8% in October from a year earlier, up from 3% in the previous monthFactory prices fell by 1.6%, compared with the median estimate for a drop of 1.5%Key InsightsPork prices were up 101.3%, according to the National Bureau of StatisticsWhile monetary policy isn’t the solution for rising pork prices caused by a supply shock, the People’s Bank of China has stayed relatively restrained compared with other major central banks even as growth has slowed. The bank offered a mini-cut to the interest rate of 1-year bank funding this week amid a bond sell-off, while keeping the overall liquidity supply neutral.“Given the pork price surges are transitory and bound to be short lived, monetary policy priority should be placed to address the worsening deflation risks rather than be concerned with transitory CPI inflation,” Liu Li-gang, chief China economist at Citigroup Inc. in Hong Kong, wrote in a recent note.The central bank is seen to be in a bind, with consumer prices rising while producer prices fall. While further monetary stimulus would help companies struggling with weakening demand, deflation and higher tariffs, even faster inflation would hurt households more. The People’s Bank of China offered a mini cut to the interest rate of 1-year bank funding last week, while keeping the overall liquidity supply neutral.“Persistent deflation in the industrial sector squeezes profitability -- reducing leeway for investment and hiring,” David Qu, economist at Bloomberg Economics in Hong Kong, wrote in a note.CPI rose to the highest since January 2012, according to data compiled by Bloomberg.Get MoreSome economists have said consumer inflation could rise to 4% soon on the back of surging pork pricesTo contact Bloomberg News staff for this story: Yinan Zhao in Beijing at;Lulu Yilun Chen in Hong Kong at;Zhang Dingmin in Beijing at dzhang14@bloomberg.netTo contact the editors responsible for this story: Jeffrey Black at, James Mayger, Stanley JamesFor more articles like this, please visit us at©2019 Bloomberg L.P.

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