China's consumer inflation slowed more than expected in September to near five-year low

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15 October 2014

China's consumer inflation slowed more than expected in September to a near five-year low, adding to concerns that global growth was cooling fast unless governments took bolder measures to shore up their economies, Reuters reported.

While the decline could mostly be attributed to falling prices for food, fuel and other commodities, which were benefiting consumers globally, the data also indicated broad weakness in the world's second-largest economy.

As risks to growth increase as also risks of deflation, Beijing was widely expected to continue to roll out a steady stream of stimulus measures over the coming months, though most economists believed it would hold off on more aggressive action such an interest rate cut unless conditions deteriorated sharply.

According to Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, policymakers in Beijing needed to start getting concerned that global disinflationary pressures were spreading to China.

The low inflation readings would open the door to further targeted monetary and fiscal easing. There was also less need for a strong currency to offset imported inflation.

The consumer price index (CPI) was up 1.6 per cent in September from a year earlier, the National Bureau of Statistics said today, which fell short of market expectations for a 1.7 per cent rise and down from 2 per cent in August.

Meanwhile, headline inflation in India declined to a five-year low of 2.38 per cent in September, as vegetable and fruit prices eased by over 13 per cent during the month, The Indian Express reported.

This was the lowest since October 2009 when it stood at 2.33 per cent. On Monday, retail inflation, which the Reserve Bank of India tracked to set policy lending rates, fell sharply to 6.46 per cent in September, the lowest since the data series started in January 2012.

The developments had increased the clamour among corporates for a rate cut to push investment and create demand.

However, with the expected interest rate hike by the US Federal Reserve sometime next year and the likelihood of ongoing geopolitical tensions pushing up crude prices, it was unlikely that the central bank would yield to the demands.

Exuding confidence of achieving a ''low and stable'' inflation rate soon, finance minister Arun Jaitley said, it was heartening to note that the government had been able to bring food inflation under control. He added the government was committed to continuing reforms in food markets that would improve supply responses and keep inflation low and stable. At the same time, fiscal consolidation and a new monetary policy framework will help bring down inflationary expectations, he added.





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