China Inflation at 29-month Low

Bloomberg reports,

China’s consumer-price inflation eased to a 29-month low in June, giving Premier Wen Jiabao more room to relax economic policies after the second interest-rate cut in a month.

The consumer price index rose 2.2 percent from a year earlier, the National Bureau of Statistics said today in Beijing. That compares with the 2.3 percent median estimate in a Bloomberg News survey of 32 analysts. Producer prices dropped 2.1 percent, versus the median forecast for a 2 percent fall.

Today’s inflation report marks a fifth month of price gains below Wen’s 4 percent target and may encourage the government to take further steps to aid growth that probably decelerated for a sixth quarter. Expansion in the three months through June probably slowed to the weakest in three years, putting Wen at risk of missing his 7.5 percent target for the year.

“The downward trend gives Beijing sufficient room for stepping up easing,” Qu Hongbin, co-head of Asian Economic Research for HSBC Holdings Plc in Hong Kong, said before the release.

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