China’s inflation rate for February rose above analysts’ expectations in data released on Friday, coming in at 4.9% for the month and clearing the way for further monetary tightening by Beijing.
However, Friday’s data also showed that current policies to control inflation were working, Reuters reported. Although analysts had expected the February rate to drop to 4.7%, the actual 4.9% came in well under earlier forecasts last year that inflation would continue at a breakneck pace. With the volatility of food prices stripped out, inflation actually slowed.
Zhou Xiaochuan, governor of the People’s Bank of China (PBC), showed cautious optimism about the consumer price index when he said at a news conference, "If we observe the CPI figures for December, January and February, although they are high, inflationary expectations are currently relatively stable."
Chinese interest rates seem destined to rise further, however, and that prospect, along with indications that the PBC will further raise reserve requirements, put a damper on global markets, already bowed under the combined effects of social unrest in the Middle East/North Africa region, the Japanese earthquake and subsequent tsunami and concerns over weak U.S. economic data.