Opinion

Steadied inflation

(China Daily)
Updated: 2011-03-12 10:55

With consumer inflation leveling off in February, policymakers have got more elbow room to check prices from rising further, a top priority for them this year.

Latest statistics show the consumer price index (CPI), a major gauge of inflation, rose 4.9 percent in February over the same month last year. The rate of increase in January was the same.

Though still above the official goal of 4 percent, the new inflation figure raises hopes that the government will succeed in keeping overall prices stable this year. And if that turns out to be true, the second largest economy's success will help the rest of the world to ease price pressures without unduly harming growth.

This is not to say that China is about to declare victory in its battle against inflation any time soon. There are ample inflationary pressures at home and abroad that policymakers have to attend to carefully.

Seasonal factors - such as temporary closure of businesses for Spring Festival - are a good reason to take a second look at tentative signs of progress in taming inflation. The recent increase in wages across the country in sync with the demographic changes lends credence to the view that wage-related pressure will add to the government's difficulties in curbing price rise.

Related readings:  China Feb CPI up 4.9%  China able to keep inflation around 4%  Inflation putting heat on govt

Besides, imported inflationary pressure because of higher global prices of commodities such as crude oil, ores and even food products are unlikely to ease in the short run. The increase in global commodity costs has already raised producer price inflation in China from 6.6 percent in January to 7.2 percent in February, the highest since September 2008.

Since inflation risks remain high, it is possible that CPI will rise in the following months to its peak. But, simultaneously, the chances of effectively curbing inflation have increased considerably because of policymakers' determination to introduce more tightening measures since the later half of last year.

While abundant grain reserves and oversupply of industrial products have laid a solid foundation for the government to prevent serious inflation, it is the prudent monetary policy that has played a key role in allaying inflationary fears. The government has raised interest rates three times and banks' reserve requirements five times since October. It has imposed a series of direct controls to check price rise, too.

As a result, inflationary fears have been somewhat allayed. But that has not prevented CPI figures from remaining high in recent months.

Steadied inflation suggests the country may be more than halfway through its campaign of monetary tightening policy. But, instead of stopping there, the urgent task for the policymakers is to stay on course of tightening control long enough to secure a victory in the fight against inflation.