Forex News – China expected to intensify growth efforts as inflation eases

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Inflation data from China today showed consumer and producer prices fell more than expected in June, signalling declining demand for goods from the second-largest global economy and the likelihood of more growth-supporting policy measures from the Chinese government.

The National Bureau of Statistics reported that annual CPI ticked lower in June to hit a 29-month low of 2.2 percent versus May’s 3.0 percent. Meanwhile, a month-on-month CPI fell 0.6 percent, which was  twice the rate of decline expected.

Likewise, producer prices fell at an even faster rate, dropping 0.7 percent on the month and 2.1 percent on the year, marking the fourth straight month of deflation in factory gate prices and pushing the PPI to a 31-month low.

Chinese Premier  Wen Jiabao said the nation’s economy faces “relatively large” downward pressure.  He said the government will intensify policy fine-tuning and “unswervingly” continue property controls.

On July 5, the PBOC (China’s central bank) cut interest rates for the second time in a month and has also lowered banks’ reserve-requirement ratios three times since November as the crisis in Europe, its largest export market, hurt growth.