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)