Food prices growth in China encouraged inflation in March

Consumer prices in China continued to grow in March 2016 due to a noticeable rise in food prices, while the decreases in producer prices was less than in February. Consumer inflation in China in March 2016 totaled to 2.3% on an annual basis, as food rose by 7.6%. Producer prices decreased by 4.3% in March, as in February decline was 4.9%. On a monthly basis, producer prices recorded their first increase since 2013 – by 0.5%.

The price increase may allow the central bank to slow further the possible incentives, despite of the fact that inflation is mostly driven by food products such as vegetables and pork. The appreciation can be seasonal and therefore temporary, recovery in property prices and raw materials suggests that the biggest deflationary threat is probably over.

The People’s Bank may lower its main interest rates by 25 basis points by the end of the year and may also lower the minimum required minimum of deposits that banks must have, with another 150 basis points.

The inflation in non-food products in China rose by 1% yoy, while overall prices compared to February decreased by 0.4%. The annual target level of inflation is 3%.

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