China inflation hits eight-month high amid tightening fear

Sat Nov 9, 2013 2:49am EST
 
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By Xiaoyi Shao and Kevin Yao

BEIJING (Reuters) - China's annual inflation climbed to an eight-month high of 3.2 percent in October as food costs soared, fanning market worries about policy tightening as factory output and investment data pointed to signs of stabilization in the economy.

Inflation, which quickened slightly from 3.1 percent in September, was still lower than a median forecast of 3.3 percent in a Reuters poll and was below the official target of 3.5 percent for 2013.

"Although the CPI inflation was mainly pushed up by seasonal food demand, it may fuel market concerns that the central bank may tighten monetary conditions," said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

The People's Bank of China refused to inject liquidity into the money markets during regular open market operations on Thursday, triggering worries it would start a new round of tightening in the next few months, traders said.

Data on Friday showed exports rebounded by more than expected in October, adding to signs the economy has found its footing as Beijing prepares its reform agenda for the next decade.

But few analysts believe the central bank will rush to tighten policy amid the lingering global uncertainties.

The PBOC has said it will maintain its prudent policy-setting with timely fine-tuning to keep the economy on an even keel while warding off inflationary risks.

The National Bureau of Statistics said food prices rose 6.5 percent in October from a year earlier, quickening from 6.1 percent in September.   Continued...

 
Customers choose goods at a shop in Beijing October 14, 2013. REUTERS/Kim Kyung-Hoon