Chinese prices hit easing hopes
China’s annual inflation spiked to a consensus-busting 4.5 per cent in January as spending jumped during the Lunar New Year holiday season, breaking a five-month softening trend and forcing a market rethink of policy easing expectations. The size of the seasonal distortion makes the January data particularly hard to read, but economists say it is likely to have squeezed out any remaining expectation of a near-term cut to bank reserve ratio requirements, a move confidently predicted in the run-up to Lunar New Year but which failed to materialise. Inflation rebounded from a 15-month low of 4.1 per cent in December. The consensus inflation forecast, also 4.1 per cent, was blown away by a 10.5 per cent surge over a year earlier in food prices, which make up roughly a third of China’s consumer price index.