April CPI Drop 1.5% Two-quarter rate cut is likely to increase

Reporter Zhang The National Bureau of Statistics on May 11 began to release the April main economic data. In the first data released yesterday, CPI fell 1.5%,ppi year-on-year decline of 6.6%, respectively, compared to last month's 1.2% and-6% continued to decline, the result is basically in line with market expectations.　　Analysts believe that the recent deflationary pressure will continue, resulting in the two quarter of the central bank to cut the likelihood of increase. According to statistics published by the National Bureau of Statistics, in April, the overall level of consumer prices, respectively, increased by 0.3 and 0.6% in the one-month decline.　　At the same time, 1-April, the total level of consumer prices fell 0.8% per cent year-on-year, the factory price of industrial products, production prices fell 8.1% year-on-year, raw materials, fuel, power purchase price down 9.6%. Zhou Chunsheng, a professor at the Changjiang Business School, argues that the negative growth of the CPI is mainly due to a decline in commodity prices, which has led to lower costs for some consumer goods, from a supply point of view, such as food and pork, where prices have fallen as a result of supply increases, and prices for automobiles and consumer electronics Affected by the global financial crisis, demand has changed.　　He even pointed out that the April CPI and PPI continued to be negative, still affected by the financial crisis and falling global commodity prices, and that in the long run, consumer and industrial prices could remain negative for the whole year, only to be negative by 2010 years.　　However, there are also different points of view, CPI two quarter is expected to appear, from this month's data, although the food prices fell 1.3%, but the price of food rose 5.5%, to some extent reflects the trend of CPI, two-quarter food prices are expected to rebound. As early as April before the economic data opened the hijab, there are institutions to predict, due to the effect of warping factors, April China's CPI and PPI is likely to continue to maintain negative growth, and the decline is likely to further expand. Based on such forecasts, expectations of a possible interest rate cut by central banks have been rampant in recent times, but this has been dashed for two weeks.　　Although the market is divided on this view, from the point of view of some institutions, academics and economists, the central bank still has a big interest rate cut this year. Some scholars believe that the January-April CPI cumulative year-on-year decline of 0.8%, the decline is greater than January-March 0.6%, and the official annual CPI regulation goal is to increase about 4%. Given the severity of the current deflation, the central bank has decided to cut interest rates two times this year, possibly at the end of the two quarter.　　Interest rate cuts will remain small, meaning more to express the monetary authority's loose policy intentions, and through the implementation of the deposit and loan interest rate of asymmetric adjustment, the more substantial downward reduction in savings rates, to maintain or expand the commercial bank's margin space. China's first-quarter gross domestic product rose 6.5% per cent year-on-year and the economy has bottomed, according to a report by the bank. The deflationary situation has allowed the central bank to cut interest rates in the first half of the year and is expected to cut 81 basis points, the reduction of deposit reserve ratio at least 100 basis points. Stephen Green, China's chief economist at Standard Chartered, also predicts that by the end of 2009, the central bank will cut the benchmark 1-year lending rate by 81 basis points, with interest rates falling from the current 5.31% to 4.5% per cent. "Despite the current economic stability, there is a need to further activate the economy in a proper rhythm." The first cut in 2009 is expected to occur in the two quarter. "Stephen also predicted that the central bank would still maintain the gap between the 1-year deposit and loan rates, which would cut the 1-year deposit rate by three times, from 2.25% per cent to 1.44% at the end of 2009.