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China’s consumer inflation grows at fastest pace in 7 months

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China’s consumer price index in September rose 2.5 per cent compared to a year ago and 0.7 per cent higher than August, government data released by the National Bureau of Statistics on Tuesday showed. That the highest reading in seven months

Producer price inflation, however, cooled for the third straight month in September — an indication of slowing economic momentum amid escalating trade tensions with the US.

The producer price index for September was up 3.6 per cent from a year ago, compared to a 4.1 per cent increase in August, the NBS data showed. The PPI rose to 0.6 percent higher compared to a month ago.

Gains in CPI were contributed by a rise in food prices due to adverse weather and a spike in demand due to the Golden Week holiday  season, said the bureau in its online report.

“Tariffs will push up prices which is inflationary, but on the other hand, China still has excess capacity, which means that demand for goods and services is not that strong,” said Chi Lo, senior economist at BNP Paribas Asset Management.

The Chinese central bank is widely expected to adjust monetary policy to shore up slowing growth. China’s official growth target this year is around 6.5 per cent.

Over the weekend, the People’s Bank of China governor Yi Gang said he saw “plenty of room for adjustment” in interest rates and the bank’s reserve requirement ratio due to significant downside risks from the bilateral trade dispute.

Earlier this week, the central bank cut the amount of reserves held by banksfor the fourth time this year — a move seen to be aimed at boosting liquidity in the system.

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