- Yang Zhao, China economist at Nomura
Consumer inflation in China rose at a slower pace than expected in September, while producer prices remained in deflation. The consumer price index edged up 1.6% last month from a year earlier, the National Bureau of Statistics reported. The measure came in against economists' expectations of 1.8% and down from August's 2.0%. At the same time, the producer price index dropped 5.9%, in line with the predictions and the same rate of decrease as in August, which was the sharpest decline since the depths of the global financial crisis in 2009.
In order to cushion the world's second biggest economy, Beijing offered stimulus package since late 2014, including slashing benchmark interest rates five times since November. However, the Chinese economy has hardly felt the effect from the undertaken measures. Many economists expect July-Sept economic growth declined below 7% for the first time since the global financial crisis. Thus, in light of persistent lacklustre growth outlook, economists expect the government to deploy moderate fiscal stimulus and continue monetary easing. Nomura predicts one more cut of reserve requirement ratio late this year and another four in 2016, coupled with two more interest rate cuts of 25 basis points each next year.
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