Market Overview

Chinese CPI Rises More than Expected, Further Monetary Easing Under Pressure

The Consumer Price Index in China rose 3.6 percent year-over-year in March, which is higher than February's 3.2 percent reading and higher than the 3.3 percent figure expected by economists.

China's inflationary pressures looked somewhat lower since the country's Producer Price Index fell more than expected. The PPI is a key indicator for manufacturing costs up the supply chain.

This higher than expected reading in CPI may put a wet blanket on China's expected monetary easing, which is the basis for what analysts' are expecting in order to prevent a "hard landing" in the country. However, if inflation is higher than expected, it is tough for any central bank to spur growth and spending, without inflation getting out of control.

This is currently causing economists to debate whether or not China should continue to ease its monetary policy to prevent a "hard landing"; however, this could risk continued higher-than-expected inflation.

"It's wrong to conclude that inflation pressures increased quickly based on the higher CPI rise in March than February," said Bank of America economist Lu Ting, in a Wall Street Journal report. He expects the People's Bank of China to cut reserve requirements at least two more times this year.

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