China’s CPI Up 1.6%; PPI Declines 5.9% In December

China’s consumer price index (CPI) edged up to 1.6% in December, from 1.5% in November. The rise was largely driven by food prices, which rose 2.7%, and contributed 0.91 percentage point to the headline CPI.

The producer price index (PPI) declined 5.9% in December, flat from the previous month, as commodity prices continued to slide.

For the full year, CPI rose by 1.4% on average, much lower than the official target of 3%.

"As deflationary pressure continues to build up, further monetary policy easing is needed," says a research report by ANZ.

The bank expects the People’s Bank of China to cut the reserve requirement ratio (RRR) by 200 basis points through 2016, with the first 50 basis points cut as early as the first quarter.

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Jillian Yue is a staff researcher at China Money Network.