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China's inflation boils on pork costs

by 5m Editor
11 September 2007, at 9:08am

CHINA - China's inflation surged to its highest rate in over a decade in August, official data showed today, raising expectations that the government will act again soon to cool the country's runaway economy.

Propelled by soaring pork and other food costs, the consumer price index rose 6.5 per cent in August compared with a year earlier and 3.9 per cent for the first eight months of the year, the National Bureau of Statistics said today.

The August figure was more than double the official full-year target of 3 per cent for 2007 and faster than the 5.6-per cent rate seen in July, which was then the highest inflation rate since early 1997.

Economists said the government would move quickly following the surprisingly high August data, despite already this year raising interest rates four times and hiking the amount of money banks must keep in reserves on seven occasions.

"We expect the central bank to respond to higher inflationary pressures with decisive tightening measures, including two interest rate hikes," Goldman Sachs economist Hong Liang said.

China's economy grew 11.9 per cent in the second quarter of 2007 and 11.5 per cent in the first half, and Premier Wen Jiabao as recently as last week warned about the dangers of overheating.

State media on Tuesday also quoted central bank governor Zhou Xiaochuan as saying the runaway inflation would likely lead to further cooling measures.

Source: The Australian

5m Editor