Economy

China's CPI to rise in May

(Xinhua)
Updated: 2011-06-08 14:22

BEIJING - China's consumer inflation will increase in May, driven by higher food prices and a lower comparison basis, adding the possibility of an imminent interest rate hike, analysts have said.

The Consumer Price Index (CPI), a main gauge of inflation, will climb to 5.5 percent in May from 5.3 percent in April, said Qiao Hong, an economist from Goldman Sachs.

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Rising food prices, particularly for pork, are the main reason for the predicted increase, she said.

Pork prices have been rising steadily since early May, as demand increased during the recent Dragon Boat Festival holiday.

Vegetable prices have also risen by nearly 20 percent, according to data from the National Bureau of Statistics.

Qiao expects food prices, which account for one-third of the CPI, to jump 12.1 percent in May from a year ago, higher than the 11.5 percent posted in April.

The China International Capital Corporation (CICC) also expects the CPI to rise to 5.5 percent, reports Shanghai Securities News. A lingering drought in south China will push up prices of aquaculture products, and non-food prices will continue to stay high, the company said in a report.

With higher inflation, analysts expect an interest rate hike to occur in June.

Economist Dong Xianan predicts that the rate hike will happen as soon as this weekend. Dong was quoted by the Shanghai Securities News as saying ?that the central bank is likely to hike the reserve requirement ratio (RRR) for commercial banks after macro-economic data is released next week.

The CICC said in its report that the government's monetary tightening measures will continue in the third quarter.

The CPI hit a 32-month high of 5.4 percent in March. To curb the rising rate of inflation, the central bank has hiked its benchmark interest rates four times since last October, and raised the RRR for commercial banks five times this year to a record high of 21 percent.