China inflation unlikely to ease soon: economist

BEIJING (Reuters) - China’s consumer price inflation will hover above 3 percent in the final quarter of this year, driven by global excess liquidity and a spike in agricultural prices, a senior government economist said in remarks published on Monday.

Fan Jianping, chief economist with State Information Center, a think tank under the powerful National Development and Reform Commission, also said that interest rate increases would not help to curb inflation, although they could possibly help contain asset price bubbles.

“Global agricultural prices will continue to climb up for a while under the U.S. quantitative easing policy,” Fan said. “Agricultural prices will have monetary foundation to stabilize only when the global money supply returns to neutral.”

A surge in hot money inflows, combined with domestic speculative money, will drive up Chinese agricultural prices, he told the official China Securities Journal.

“Interest rate hikes are not able to curb vegetable and pork price rises,” he said. “But rate rises are negative for the stock and property markets, so they may be able to contain asset bubbles.”

China’s central bank raised interest rates in October, for the first time in almost three years.

Fan also said China’s consumer price inflation would probably not peak in October, as expected by many economists in the market.

“If weather conditions deteriorate, it’s unlikely to see a clear fall in CPI in November and December,” he said.

The National Bureau of Statistics is scheduled to announce China’s October economic indicators on Thursday. Economists polled by Reuters forecast for consumer inflation of 4.0 percent last month.

Reporting by Langi Chiang and Simon Rabinovitch; Editing by David Chance