China’s inflation is spreading beyond food, signaling PremierWen Jiabao’s strategy of quarter-point interest-rate increases every two months has yet to contain consumer prices.
Clothing costs climbed 1.4 percent in April from a year earlier, the biggest gain since 1997, a statistics bureau report showed yesterday. Non-food inflation held at 2.7 percent, the fastest pace in at least six years, while overall consumer prices rose 5.3 percent.
Higher wages and commodity costs are adding to price pressures as the government restrains gains in the yuan that would cut the cost of imports. Deutsche Bank AG sees inflation peaking at as much as 6 percent in June, with policy makers raising borrowing costs at least once more as they aim to limit full-year price gains to 4 percent.
Inflation is “the most pressing problem” facing the world’s second-biggest economy, Vice Premier Wang Qishan said this week. Monetary policy will remain “prudent” and focus on removing “inflationary monetary elements,” Chinese officials said in a statement in Washington after talks with the U.S.
In addition to raising interest rates, People’s Bank of China Governor Zhou Xiaochuan has lifted reserve requirement ratios seven times since mid-November, curbing credit growth by forcing lenders to park more money at the central bank.