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CPI surge within normal range: banker

(Xinhua)
Updated: 2010-03-12 13:23

China's February consumer price index (CPI), a main gauge of inflation, is still within normal range, although the figure surged higher than expected last month.

CPI rose 2.7 percent year-on-year in February, 1.2 percentage points higher than January, driven by a 6.2 percent rise in food prices, the National Bureau of Statistics (NBS) said Thursday.

Yang Ziqiang, head of the People's Bank of China's Jinan bureau, said the hefty rise is because the Lunar New Year holiday fell in February this year, but in January last year.

The Lunar New Year holiday, or Spring Festival, is the most important traditional festival in China for family reunion. People usually spend a lot on food, alcohol, cigarettes and gifts during the period.

Yang, also a deputy to the National People's Congress (NPC), China's top legislature, said on the sidelines of the ongoing NPC session.

China targets a rise of consumer price of around three percent this year, says a government work report delivered by Premier Wen Jiabao at the parliament's annual session on March 5.

Yang said severe inflation is unlikely to emerge this year, as market supply still outweighs demand, and government regulation on the real estate industry will help stabilize prices.

But he cautioned against the consistent commodity price increases, as the international crude oil prices rebounded to above $80 a barrel.

Li Daokui, a financial professor with the Tsinghua University, said CPI rise exceeds the current one-year deposit interest rate, or 2.25 percent, which will enhance the expectation of interest rate rise.

China's CPI ended nine months of decline in November last year, when it rose 0.6 percent, as the economy picked up thanks to the government's stimulus package.

However, the unprecedented bank loans last year together with runaway housing prices pushed up fears for inflation and asset bubbles, posing a policy dilemma for the government to balance between sufficient economic growth and containing potential overheating.