China’s monthly inflation has accelerated to the highest level in more than 10 years as increasing food prices are continuously hurting the economy and fueling the speculation of another interest rates hike.
In a monthly report, the National Bureau of Statistics disclose that consumer prices soared 5.6% in July from a year earlier, after gaining 4.4% in June against analysts maiden 4.6% forecast.
The food prices were the major contributor to inflation as its costs raised 15.4% after a shortage of meat supply and bad weather destroyed crops, while non-food items rose only 0.9 percent.
Chinese leaders are trying urgently to curb the sharp rise in food prices, which has hit the country’s poor majority hard. Chinese people have a relatively low disposable income and food accounts for a major part in people’s daily spending. In 2006, the disposal annual income for urban residents stood at 11,759 Yuan and at 3,587 Yuan for rural residents.
Weighing the problem of rising pork prices, Beijing has promised free vaccinations for pigs and other aid to farmers to raise pork production. National Development and Reform Commission, the country’s top price regulator, has ordered a crackdown on the manipulation of food prices, after several industry associations and firms announced plans to raise prices, including instant noodles and Chinese fast-food chains.
In the middle of inflation, policy makers are adamant to take all possible measures to keep the basic stability in prices as they are planning to increase interest rate again. China has raised interest rates three times so far this year, with the last one on July 20 when the benchmark one-year deposit rate rose to 3.33%.
