Slower Chinese inflation opens door to more easing

@CNNMoney July 9, 2012: 7:59 AM ET
China's annual inflation rate fell to TK% in June, as food prices fell.

China's annual inflation rate fell to 2.2% in June, as food prices fell.

NEW YORK (CNNMoney) -- Prices are tumbling in China, giving the government more leeway to stimulate the world's second-largest economy.

China's annual inflation rate fell to 2.2% in June, the government's National Bureau of Statistics reported Monday. That's the lowest inflation rate in nearly two-and-a-half years and comes as prices have been falling, especially on food.

Food prices, which account for more than a third of the inflation calculation, fell 1.6% during the month. Compared to a year earlier, they were up 3.8%.

Transportation costs, which count for about a tenth of spending, also fell, as did prices for residential water and electricity.

Overall, China's economic growth has started to slow amid weaker global demand. Simultaneously, inflation has slowed dramatically, freeing China's central bank to stimulate the economy.

The People's Bank of China has lowered interest rates twice in the last month. The central bank has also tried to spur growth by cutting the amount of money banks are required to hold in reserves.

Some economists have raised fears of a so-called hard landing in China, in which economic growth slows sharply. Others believe the government still has plenty of room to act, especially now that rapid inflation is not a problem.

"Inflation continued to ease at a pace slightly faster than expected, which leaves sufficient room for Beijing to take further easing actions," Sun Junwei, HSBC's China economist, said in a note.

Last month, Fitch Ratings researchers predicted the Chinese economy will grow 8% this year, well below the average of 10.5% per year between 2007 and 2011.

Even so, Fitch said China's current slowdown does not compare with its much sharper slump in late 2008.  To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.98%4.08%
15 yr fixed3.09%3.11%
5/1 ARM3.20%3.22%
30 yr refi4.06%4.16%
15 yr refi3.17%3.20%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
CNNMoney Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.