With consumer prices shooting up at a surprisingly high speed,
policymakers should not rely on talking to keep inflation in check.
It is high time to act against the rising inflationary
pressure.
The latest figures show inflation jumped to 5.6 percent in July,
the highest monthly rate for a decade.
Surging food prices remain the key driving force pushing the
consumer price index (CPI) up 3.5 percent year on year in the first
seven months of this year, well above the central bank's 3-percent
inflation target.
Food prices, which account for a third of the CPI, were up 15.4
percent on last July. Grain prices rose 6 percent, meat and poultry
45.2 percent and eggs 30.6 percent.
In an ostensible effort to quell fears of an acceleration in
overall inflation, the National Bureau of Statistics stressed that
July's sharpest increases were limited to food.
"As industrial product prices and service prices remain
relatively stable, the prices should not rise in an all-around and
sharp way," its spokesman said.
Such talk might sound reassuring.
Prices of non-food goods rose just 0.9 percent in July from a
year ago. And if the country can reap a bumper autumn harvest, it
is reasonable to predict the inflation rate will fall in the final
quarter of the year.
But such arguments will do little to prevent expectation of
price increases if inflation is left to hover at such an
uncomfortably high level.
On one hand, a bumper autumn harvest is not a sure bet.
Agricultural authorities have already warned the lingering drought
that has plagued a large part of the country could put the autumn
grain harvest under severe threat.
On the other hand, there are more reasons to believe the current
rise in inflation is not solely due to temporary factors like an
inadequate supply of pork.
Considerable wage hikes, increasing energy costs and rising
expectations of price increases have all added to inflation
pressures. Faster growth of the national economy and vast liquidity
inflows will only further inflate consumer prices rather than bring
them down.
Given all these, it is urgent for policymakers to take more
tightening measures to prevent the economy from overheating and
tame inflation.
The latest monthly inflation figure indicates the sharp rise in
food prices has already bitten deep into the pockets of the people,
especially those on low incomes.
And the 3.5-percent CPI growth in the first seven months has
again pushed the real deposit interest rates into negative
territory.
Admittedly, the inflation rate is not yet a cause to panic. But
"business as usual" talks will not reduce the public's worries
about continuous price hikes.
(China Daily August 14, 2007)
