Instant view: China December inflation edges down

BEIJING (Reuters) - China's consumer inflation slipped to 4.1 percent in the year to December, the fifth straight month of decline from a three-year high of 6.5 percent hit in July, providing more room for the central bank to tilt its monetary policy towards a pro-growth mode.

COMMENTARY:

DONGMING XIE, ECONOMIST AT OCBC BANK, SINGAPORE:

"PPI is in line with our expectation reflecting lower commodity prices. However, CPI is slightly lower than our expectation given that food prices rose quite sharply in December.

"This suggests non-food inflation eased as a result of easing economic activities. For this year, we expect CPI to moderate further. The negative real interest rate is likely to be corrected in the second quarter of this year.

"Easing price pressure also makes the central bank's job slightly easier. We expect China to lower RRR three more times this year."

ZHIWEI ZHANG, ECONOMIST AT NOMURA, HONG KONG:

"The month-on-month CPI was lower than the same month in the past few years. That means inflation is no longer a main concern for policymakers.

"China is more worried about an economic slowdown now and will continue the policy easing cycle.

"Loan supply will increase in the first three months and China will cut interest rates probably in March. We expect GDP growth will slow down rapidly to 7.5 percent in the first quarter."

STEPHEN GREEN, SENIOR ECONOMIST AT STANDARD CHARTERED BANK, HONG KONG

"There's a debate about to what degree China is loosening or not. If anything this will support those who say that China is not significantly loosening so that's a disappointment for the market.

"Speaking to our clients there's really mixed messaging about what's happening with credit conditions, and of course we have yet to see another RRR cut.

We expect Q1 CPI to average around 3.5 percent; our year forecast is the lowest on the street. We think there will be quite a dramatic decline in inflation in the first half."

(Reporting by Beijing Economics Team; Editing by Ken Wills)