China's July CPI rally likely to reach year highs

Whether to raise interest rate is necessary, still have the big dispute "Caixin Net" (reporter Jing) is affected by the rainstorm flood, the agricultural product price recently continued to rise.　　Some researchers have predicted a year-on-year increase in consumer prices for July could reach 3.5%.　　According to the Ministry of Commerce monitoring, four weeks from July 5 to August 1, the price of edible agricultural products continued to rise in the week, the increase was 0.5%, 1%, 0.7% and 0.3%. Sun, China's chief economist for Nomura Securities, said the ministry's data showed that prices of edible agricultural products rose by 1.6% in the three-week period before July, while the price of edible agricultural products fell by 1.6% in June.　　The July CPI could jump from 2.9% in June to 3.5%, he predicts.　　Sun that food prices have soared because of heavy rainstorms in many provinces in July, and prices may fall in September or October after the end of the rainstorm season.　　To reduce the real negative interest rate in China, he said, it would still have to raise interest rates by at least two times in the second half of this year at 27 basis points, according to CPI inflation levels.　　Shen Jianguang, chief economist at Mizuho Securities Greater China, said the CPI rise of 3.5% per cent was an important hurdle that could trigger a rise in interest rates. While China International Finance Limited believes that, despite the recent floods and other disasters, short-term agricultural prices are facing upward pressure, but does not constitute a basis for sustained inflation.　　CICC expects CPI growth to rise to 3.4% per cent year-on-year in July, and the July PPI may continue to fall to 5.2%, affected by falling international commodity prices. China's manufacturing Purchasing Managers ' index (PMI) fell to 51.2% in July, the lowest for 17 consecutive months, the Chinese Federation of Logistics and Procurement announced in Sunday. In PMI's sub index, the purchase price index continued to fall in July.　　CICC pointed out that this shows that the PPI to the CPI inflation conduction pressure further weakened.　　CICC agrees with the International Monetary Fund (IMF) that "the Chinese monetary authorities believe there is no need to raise interest rates under the current inflationary outlook and that raising interest rates could trigger capital inflows". At the end of July, the IMF issued China's Fourth consultative report (the so-called "fourth article"), which refers to the IMF's article fourth, whereby the IMF conducts bilateral discussions and a final report on economic situation and policy with Member States on a yearly basis.　　The report predicts that China's CPI is likely to peak in 2010 and then begins to fall, with inflation in China set to remain at a low level of 2% to 3% in the next few years, even as external demand picks up and commodity prices rise. China's price levels have remained stable since the 90, the IMF said, excluding food-price inflation.　　Due to overcapacity, import demand and commodity prices have limited impact on non-food prices, while food prices are mainly affected by fluctuations in agricultural supply. In the short term, a sharp increase in investment and a significant increase in productivity starting at the end of 2008 will reduce inflationary pressures on demand growth. Although China's wages have risen recentlyRange of 10% to 15%, but this is the normal response to productivity gains and will not be transmitted to ordinary prices. In addition, wage increases will lead to the transfer of investment to the Midwest inland areas, narrowing the income gap.