morgan-stanley-predicts-moderate-inflation-in-china-in-2010

Morgan Stanley predicts moderate inflation in China in 2010

To expect high inflation based on the strong growth of monetary aggregates would be a mistake, the US investment bank says.

Although China's headline inflation indicators such as the year-on-year consumer price index CPI and production price index PPI are likely to rise early in 2010, analysts at Morgan Stanley believe the actual inflation rate will remain moderate in 2010 as a whole, with the average CPI inflation at around 2.5%.

Inflation is expected to rise rapidly in the first two quarters this year as the lag effects of strong M2 broad money growth in late 2009 are only partly offset by exports, which will remain weak. In the third quarter, inflation will start to moderate as a projected pick-up in export growth will be offset by a moderation in M2 growth.

But the analysts believe...

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