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China Inflation Slows To 20-Month Low As Food Price Pressures Ease


Inflation in China eased to a twenty-month low in February as growth in food prices slowed markedly, giving room for policymakers to relax monetary conditions amid flagging economic growth.

The National Bureau of Statistics said Friday that the consumer price inflation eased to 3.2 percent in February, after accelerating to a three-month high of 4.5 percent in January. Economists expected a slowdown to 3.4 percent. The figure is the lowest since June 2010.

On Monday, Premier Wen Jiabao set an inflation target of 4 percent for 2012, unchanged from last year. Inflation exceeded the target every month in 2011 due to rise in food costs.

In February, food price inflation eased to 6.2 percent from January's 10.5 percent. Non-food prices were up 1.7 percent, almost at the same pace as in the previous month. Meanwhile, house prices increased at a faster pace of 2.1 percent year-on-year.

Transportation costs fell 0.4 percent year-on-year, despite an increase in fuel prices. The National Development and Reform Commission hiked the retail prices of gasoline and diesel in February, amid mounting pressure on the country's refineries.

The producer price index recorded no change last month after 0.7 percent annual increase in January. Economists expected a 0.1 percent increase.

The Chinese economy expanded at the slowest pace in more than two years in the fourth quarter of 2011 as a result of sluggish external demand and Beijing's past policy tightening to contain inflation and property prices.

During this week's National People's Congress, Wen said China will aim for 7.5 percent economic growth this year, lowering the target from 8 percent for the first time in eight years. The economy expanded 9.2 percent in 2011, easing from 10.4 percent in 2010.

Last month, the People's Bank of China decided to cut the banks' reserve requirement rate by 50 basis points for the second time in three months to boost growth, but refrained from an interest rate cut fearing inflation surge from possible spike in global fuel prices.

by RTTNews Staff Writer

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