Inflation in China surged to its highest level in three years in June, showing little sign of abating despite Beijing's aggressive policy tightening. The latest spike was fueled by surging food prices.
Inflation climbed to 6.4 in June from 5.5 percent in May, the National Bureau of Statistics said Saturday. The rate was a tad above market expectations of 6.3 percent.
Food prices surged 14.4 percent from a year earlier, while non-food costs rose 3 percent. Housing costs were 6.2 percent higher than last year. Prices of utilities were up 4.1 percent.
In its latest move to combat surging inflationary pressures, the central bank hiked its interest rates on July 6. This was the fifth hike since October last year. The People's Bank of China (PBoC) raised the benchmark deposit and lending rates for financial institutions by 25 basis points.
The interest rate on one-year loan was raised to 6.56 percent from 6.31 percent. The one-year deposit rate was increased to 3.50 percent from 3.25 percent. The new rates are effective July 7.
The central bank also lifted its reserve requirement for banks six times this year. The ratio for the large banks is now at 21.5 percent.
The statistical office also reported that the the producer price index rose 7.1 percent year-on- year in June, exceeding market forecasts for a 6.9 percent increase. In May, the producer price inflation rate was 6.8 percent. On a month-on-month basis, the June PPI remained flat with May.
China's rising inflationary pressures are fueling concerns that the central bank's continued policy tightening amid slowing growth may lead the world's second largest economy to a hard landing. Now, with inflation climbing to a multi-year high, policymakers are facing a daunting task of taming price pressures without affecting growth.
A steeper-than-expected slowdown of the Chinese economy is widely expected to dampen global growth, already hit by crisis in Eurozone peripheries, unrest in the Middle East and a slowing U.S. economy.
The latest PMI survey showed that China's factory growth continued to moderate in June. The survey for the non-manufacturing sector also pointed to a slowdown in the private sector. Growth in China's gross domestic product moderated in the first quarter to 9.7 percent from 9.8 percent in the fourth quarter of 2010.
According to China's State Information Center, consumer prices in the economy likely peaked 5.3 percent in the first half of 2011. The government agency forecasts inflation to retreat to 4.5 percent to 5.5 percent during the second half.
The think tank projects the economy to grow at a robust pace of 9.5 percent in the first half of the year, with little chance of a hard landing.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.