Chinese inflation remains weak, opening the door to further stimulus

Photo by Natalie Behring-Chisholm/Getty Images)

Consumer prices rose just 1.3% from October 2014, missing expectations for an increase of 1.5%. The figure marked the slowest annual expansion seen since May, and was well below the 1.6% pace seen in September.

As it has done for the past 43 months, producer prices continued to decline, falling 5.9% from a year earlier. The reading, unchanged from September, missed expectations slightly, with markets expecting a fall of 5.8%.

The weak readings open the door to further monetary policy easing, along with a further weakening in the renminbi.

China’s central bank, the PBOC, has cut interest six times since November last year and repeatedly reduced banks cash reserve requirements in an attempt to underpin flagging economic growth.

Given the PBOC’s easing cycle has been staggered evenly since it began late last year – occurring roughly every second month – if the bank does decide to ease monetary conditions further it’s likely to arrive around late December based on recent patterns.

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