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China's inflation in the third and fourth quarters may have dropped significantly
UBS recently released a research report that it expects China's consumer price index (CPI) to rise by 6% to 6.5% in June. The CPI increase in July will remain near that level, but by the end of the year, The CPI increase will drop to 4%. The Swiss bank currently expects China to raise interest rates again this year, and the time is likely to be in July. Chinese Premier Wen Jiabao’s recent comments on inflation control have eased market tensions. In a speech to Hong Kong Television Broadcasting Co., Ltd. in London on Monday, Wen Jiabao said that it is difficult to control China's inflation rate below 4% this year, but it is possible to control below 5%. China's stock market closed higher on Monday, rising for the fifth consecutive trading day; Wen Jiabao's above speech eased the market's concerns about China's possible further tightening of monetary policy. Swiss banks said that warm weather conditions this spring pushed vegetables prices down, and the bank expects other food prices to fall after summer harvest. But the bank said that droughts and floods in central and southern China and rising pork prices may delay the fall in food price inflation, and the CPI increase of 6% or more may be extended by one or two months. But Swiss banks expect non-food price inflation to rise further this year. Considering that inflationary pressures remain high, UBS believes that the Chinese government may not loosen its policy of tightening credit.