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Christine Chan

Economists  expect  mainland consumer prices to rise faster  in the next quarter, further raising prospects for an interest rate increase.

The  consumer price index, a benchmark of inflation,  rose to 3.8 per cent year-on-year last month,  higher than expected. It also comes closer to 5 per cent,  the rate which the central bank  has warned could trigger  it to tighten credit.

'This is not the peak - we expect even more acceleration over the next quarter,'  UBS Asian economist Jonathan Anderson said yesterday. 'The CPI will continue to rise to above 5 per cent.  It could be between 5 and 7 per cent.'

'The People's Bank of China [the central bank]  is likely to follow the CPI with interest rates hikes,' Mr Anderson said. 'But we expect very gradual increases, with no significant effect on the real economy.'

He said raw materials prices drove the present 'cost-push' inflation  and  therefore did not signal that the authorities were losing control of the economy.

HSBC economist Qu Hongbin ,  expected the CPI  to accelerate, reaching 4.5 per cent this month and 5.8 per cent next month. Last month, central bank  deputy governor Wu Xiaoling  said  the bank would consider raising  rates if  consumer price pressures were to tip the real lending rate into negative territory.



Consumer prices set to gather pace