China’s Inflation Cools Further

Consumer price inflation in China is now down to its lowest level in almost three years. October’s consumer price index rose 1.7% year-on-year, compared to September’s 1.9% and August’s 2%. The deceleration last month was more rapid than expected on the back of weaker food prices. Policymakers now have more scope to spur growth should they chose to do so, though the central bank has been using open market operations as its main way to reverse the slowdown of the economy. The liquidity it is injecting can be swiftly withdrawn if inflationary pressures resume, a lesson learned from the inflation spike that followed the massive stimulus package introduced after the 2008 global financial crisis and which has taken it a long hard slog to bring down.

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