Econintersect: China has already hiked interest rates three times since October and today’s inflation report increases the probability of further hikes. The inflation rate of 4.9% in January was above the December value of 4.6%, which was widely expected to be repeated. However, both numbers are higher than the government target of 4% maximum.The exact meaning of the inflation rate is being clouded because the CPI index is being revised to put less emphasis of food and more on the cost of property and services. Food inflation has been particularly troublesome in recent months. This means that comparisons of 2011 CPI to 2010 will be more difficult.
Sources: GEI News and Financial Times
