Agencies expect the year-on-year CPI growth to fall slightly in January

2022-05-11 0 By

In the background of overseas inflation “high fever does not retreat”, can China’s price operation continue “independent market”?The upcoming January price movement data is expected to provide an important reference.Many institutions believe that although the prices of fresh fruits and vegetables rose in January due to the Spring Festival holiday and other factors, prices have been stable since 2022 as the pork price has been weak in the peak season, driving down the overall increase in food prices.Year-on-year consumer price inflation is expected to be around 1.0 per cent in January, down from 1.5 per cent in December.In terms of price trends, domestic “stability” and overseas “inflation” is expected to continue to present a sharp contrast, for China’s monetary policy to adhere to the “self-centered” to provide favorable conditions.In previous years, before the Spring Festival, the holiday factors drive the expansion of demand, combined with climate and other factors, the rising prices of fresh vegetables, meat and other factors often act as an important driver of the seasonal rise of CPI.This year, though, is a bit special.Everbright Bank financial market department macro researcher Zhou Maohua said, this year’s Spring Festival holiday before and after the climate is normal, coupled with various aspects to increase the price stability, the market at the beginning of the year smooth and orderly, fruit and vegetable prices as a whole more stable.Pork prices, which have a large weight in CPI, show the characteristics of low peak season.Zhou maohua said that due to the spread of the epidemic, pork demand has not yet returned to its normal level, but pig production capacity has returned to normal, and near the Spring Festival, pork supply increased, pushing pork prices down.Pork prices fell about 9 per cent month-on-month in January, high-frequency data showed.On February 8, the National Development and Reform Commission (NDRC) announced that from January 24 to 28, the national average pig grain ratio was 5.57∶1, between 5:1 and 6:1 for three consecutive weeks, entering the second-level warning range of excessive decline set by the “Improving the government pork reserve regulation mechanism to ensure supply and price stability in the pork market plan”.How big is the impact of falling pig prices on CPI?According to Zhou Maohua estimates, pork prices in January about the impact of the CPI fell by 0.16 percentage points.Taking into account base effects, year-on-year CPI growth in January is expected to be slightly lower than in December.Dong Qi, chief analyst at Guotai Junan Macro, expects the CPI to rise 1.0 percent year-on-year in January, down 0.5 percentage points from December.According to Wind, the average forecast for January’s year-on-year CPI rise was 1.1%.In sharp contrast to the stable operation of domestic prices, recent inflation indicators in the US and Europe and other major economies have continued to rise faster than expected, while overseas inflation is still running a high fever and inflation expectations continue to spread.Referring to the imported impact of overseas inflation, Wen Bin, chief researcher of China Minsheng Bank, said that since 2022, China has introduced a series of measures to stabilize growth, and the policy effect is expected to continue to show, and imported inflation pressure is expected to be controllable.Liu Zhicheng, a researcher at the Market and Price Research Institute of the National Development and Reform Commission (NDRC) macro-Economic Research Institute, believes that there is a solid foundation for China to maintain stable price operation in 2022. CPI is expected to continue a moderate rise, PPI inflation may gradually decline, and upstream and downstream price trends are more coordinated.The stable operation of domestic prices provides favorable conditions for monetary policy to continue to be “self-centered”.The co-chief economist of Citic Securities clearly predicted that the Fed’s shrinking of its balance sheet may push long-term interest rates up in the United States, which will have a short-term impact on THE US stock market, but will have a limited impact on China’s cross-border capital flows, monetary policies and bond interest rates.Wang Chunying, deputy director and spokesman of the State Administration of Foreign Exchange, said the spillover effects of the Federal Reserve’s monetary tightening this time may be smaller than the previous round.On the one hand, the economic growth and monetary policies of major economies in the US and non-US countries are better synchronized than in the previous round. The Federal Reserve has paid close attention to communicating with the market. Pricing in the international market will be adjusted accordingly, and the spillover effects have been partially released.On the other hand, China has strong economic fundamentals, a sound balance of payments structure, a stable current account surplus and ample foreign exchange reserves, all of which will help China better adapt to changes in the external environment.