China's Feb inflation accelerated to a six-month high in February as seasonal distortions caused food prices to spike. Data released on Wednesday showed that China's CPI inflation unexpectedly rose to 2.3% y/y in February, significantly higher than market expectation of 1.8%.
Food prices were the driving factor. Food prices, which account for one-third of the CPI calculation, soared 7.3 percent year on year while non-food inflation edged up 1 percent. Meanwhile PPI remained in deflationary mode, fell by 4.9% in February, from -5.3% in the prior month.
"Part of the increase is due to Chinese New Year-related issues. Generally, the inflation picture overall is quite tame. For the whole year, we're still looking for inflation below 2 percent," said Grace Ng, greater China economist at J.P Morgan.
"We believe that the cut to the reserve requirement ratio is still on the table as capital outflows persist. A modest 25bps cut in policy rates is still likely, but some sort of property curb policy in the first-tier cities can be highly expected." said HSBC Global in a report.