Time to cage inflation tiger, say experts
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Li Yining, a senior economist at Peking University, said if inflation soars above 4 percent, the authorities would have to impose tighter measures to stem the growth. "It should be the warning line," he said.
China's central bank last week unexpectedly raised the proportion of deposits that commercial lenders must set aside as the country's credit boom threatens to worsen inflation, which rose by 0.6 percent in November, the first year-on-year growth since last January.
The consumer price index (CPI), the main gauge of inflation, may rise 1.4 percent in December, according to economists surveyed by Bloomberg, intensifying worries that high inflation is coming back as the economy picks up.
Apart from raising banks' reserve requirement ratio, the People's Bank of China, the central bank, raised the three-month central bank bill issuing rate for the first time since August 2009 on Jan 7. Analysts see this as a prelude to a series of tightening monetary policies, including interest rate hikes.
"The central bank is likely to increase interest rates twice by 27 basis points this year after April," said Dong Xian'an, chief macroeconomics analyst with Industrial Securities.
"Gone are the days when we can have economies with high growth rates and inflation as low as 2-3 percent," he said.
