The Bank of China has forecasted a 7.5 percent or even higher rise in the
January Consumer Price Index (CPI), mainly fuelled by rocketing food prices and
the worst snow disaster in decades.
The bank said in report issued Friday that the CPI would rise between 5 to 7
percent in the first half this year, and decelerate to 3-4 percent in the latter
half. The yearly CPI increase for 2008 would stay at the same 4.8 percent as
that of last year.
The yearly GDP growth would be 10 percent, less than the 11.4 percent for
2007, the bank predicted.
The grain price rise last December helped stir up another roundof food price
jump, which is the main force driving up the inflation index, the report said.
Grain prices in major wholesale markets rose by a year-on-year 10 percent in
2007, and the prices of soybean, corn and wheat jumped between 7.2 to 25 percent
last year.
The report noted the massive losses from the snow havoc could help fuel
inflation in the short-term. The disaster, however, could take a limited toll on
the national economy in the long run.
The CPI rose 4.8 percent in 2007 and hit an 11-year high of 6.9 percent in
November, well above the government target of 3 percent.
The report suggested the central bank should tighten monetary policies to
curb inflation and continue to stimulate domestic demand. One or two interest
rate hikes are advisable.
Another deposit reserve ratio rise is projected by the bank this month.
