China's consumer inflation dipped to 6.1 per cent in September, retreating further from three-year highs, although stubborn food price pressures will deter the central bank from loosening its policy reins anytime soon.
A slowdown in price rises would be welcomed by policymakers as confirmation that a flurry of increases in interest rates and bank reserve requirements is working, just when China's economy is showing increasing strains from the global downturn.
Since inflation is still close to the three-year peak of 6.5 per cent hit in July, few analysts believe China will follow the likes of Brazil, Indonesia and Singapore and ease policy in the near-term, barring a marked deterioration in Europe's debt woes.
"The slowdown in the CPI last month is not drastic enough to reduce inflationary expectations, and it is still too early to confirm an easing trend in price pressures," said Qiao Yongyuan, an analyst with CEBM in Shanghai.
"The central bank is more likely to keep its current monetary stance unchanged and will wait for data in coming months to judge the direction of policy," Qiao said.
The dip in inflation in September was right in line with a poll of economists' forecasts and lower than August's reading of 6.3 per cent.
Food price pressures remained strong, however, rising 13.4 per cent from a year earlier, unchanged from the pace in August's data. Non-food inflation eased to 2.9 per cent from 3.0 percent in August, the data showed.
China's producer price index in September came in below market expectations with a 6.5 per cent rise from a year ago, compared with August's 7.3 per cent.
"The data will come as a relief to the Chinese government, which now faces a deadlock in policymaking. It will fine-tune policies in December," said Shen Jianguang, an economist with Mizuho Securities Asia in Hong Kong.
City A.M. Reporter