Inflation in China Rises Sharply to 8.7% on Food Prices (Bloomberg) (11-03-2008)

March 11 (Bloomberg) -- China's inflation accelerated to the fastest pace in 11 years as a result of the disruptions in food supplies caused by the worst snowstorms in half a century, which added pressure on the central bank to raise interest rates.

Consumer prices climbed 8.7 percent in February from a year earlier after gaining 7.1 percent in January, the statistics bureau said today. That was faster than the 7.9 percent median forecast of 22 economists surveyed by Bloomberg News.

Food costs soared 23 percent after blizzards destroyed crops and snarled transport links, causing shortages. China, the biggest contributor to global growth, raised rates six times last year in a failed attempt to curb prices and more increases risk triggering an economic slump as export demand weakens.

The key one-year lending rate is at a nine-year high of 7.47 percent. The deposit rate is 4.14 percent, less than half the pace of inflation.

The Yuan traded at 7.1040 versus the U.S. dollar as of 4:08 p.m. in Shanghai from 7.1099 before the data was released. The yield on the benchmark 15-year bond rose by 1 basis point to 4.17 percent.

China's producer-price inflation accelerated to the fastest pace in more than three years in February, adding pressure for consumer prices to keep rising.

Source: Bloomberg