Business News :China Vows To Tame Inflation, China will intervene to control consumer prices if they rise too quickly, the government said on Wednesday, a move that will do little by itself to tame inflation but could foreshadow harsher monetary tightening.
Steps to cool demand in China, the world’s fastest-growing major economy, could weigh on global markets at a time when recoveries in Europe and the United States remain fragile.
To begin with, the State Council, or cabinet, said it would aim to increase the supply of commodities, especially food, that have driven inflation to a 25-month high, while also clamping down on speculative demand that has lifted prices higher.
“We need to understand the importance and urgency of stabilizing market prices and take forceful measures,” it said after a routine meeting chaired by Premier Wen Jiabao.
“When necessary, temporary intervention measures will be implemented on prices of some important daily necessities and production materials,” it added in the statement.
The State Council singled out grain, oil, sugar and cotton as markets that it wanted to stabilize. It also vowed to intensify a crackdown on price speculation and to punish those found hoarding commodities and pushing up prices by illegal means. The statement made no mention of monetary policy.
“I don’t believe that they will just stop here,” said Kevin Lai, an economist with Daiwa Capital Markets. “Many people in the government are capable enough to figure out that prices controls are not that effective.”
“They really have to do something more about controlling liquidity and money supply growth if they are serious about containing inflation,” Lai said, adding that he expected the central bank to raise interest rates for the second time this year over the next two weeks.Reuters
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