According to the Statistics Bureau in Beijing, the Consumer Price index of China inclined during April by 5.3% (Y-2-Y).
This inflation rate is above the expectations of China’s government target inflation rate of annual increase of 4%. At the current situation, this might cause the People Bank of China to take additional steps in trying to curb the current rise in inflation such as raising interest rate or raising reserve requirements ratio of commercial banks.
The chart below shows that despite the raises in loans and deposits interest rate, China’s inflation rate keeps on rising. This is due, in part, to the rise in crude oil prices during 2011.
If China will take further steps to slowdown the rising inflation, it might also adversely affect China’s economic growth and consequentially might reduce its demand growth for major commodities, including crude oil.
For more on this subject:
- Oil prices fell sharply last week – Weekly recap 2-6 May
- Weekly outlook for May 9-13
- Following the oil prices falls last week what’s up ahead? Oil outlook 9 May