November Inflation Number Underlines Need For Speedy Action

Consumer price inflation hit 5.1% year-on-year in November, the fastest growth in 28th months and well up, as expected, from October’s 4.4%. The expected interest-rate hikes haven’t been announced yet, though we still expect to see them before the end of the year. There may have to be some managing of the yuan’s exchange rate first to cool capital inflows (and that may be more political than technical managing).

Fighting inflation and mopping up the excess liquidity that is fueling it are the priorities for 2011 agreed at the annual top-level economic meeting that has been going on over the weekend, Xinhua reports, though that was true before the meeting, too. What is also true is that the longer clamping down on inflation is left, the harder it gets to do.

The National Development and Reform Commission said on Sunday that consumer price inflation will probably fall below 5% in December as the price controls announced in late November take effect. Another truth is that supressing inflation is not the same as reducing its underlying causes.

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