November inflation to ease in China, more RRR cuts eyed

BEIJING, Dec. 5 (Xinhua) -- China's central bank on Monday began implementing a new reserve requirement ratio (RRR) for banks, allowing the country's lenders to keep fewer deposits in reserve to shore up the slowing economy.

Easing inflation encouraged China's policy-makers to shift the policy focus from price control to stabilizing economic growth due to slack external demand amid the staggering recovery in Europe and the United States, analysts said.

Economists widely expected the year-on-year growth of the consumer price index (CPI), a main gauge of inflation, to further ease below 5 percent in November, as weakening food prices will further drag down the CPI rate.

Different government data from the Ministry of Commerce, the Ministry of Agriculture and the National Bureau of Statistics (NBS) showed that prices of farm produce -- particularly the prices of meat and eggs that had risen rapidly in previous months -- have continued to fall moderately since the beginning of November.

Tang Jianwei, a senior macroeconomic analyst with the Bank of Communications, estimated that food prices will drop by between 0.7 percentage points and 1.5 percentage points.

Food prices account for about one-third of the calculation of the CPI.

The carryover factor, which measures the impact of last year's prices on the year-on-year changes in prices of this year, will pull down the yearly CPI growth in November by 1.1 percentage points, as compared with October, Tang said

"We projected the CPI growth to ease to around 4.3 percent in November," he said.

Lu Zhengwei, chief economist of the Industrial Bank Co., Ltd., anticipated the CPI growth in November to be between 4.2 percent and 4.4 percent.