Food pushes up inflation in China

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Chinese inflation jumped in February, driven by higher food costs.

Consumer prices were up 2.7% last month from a year ago, against January's rate of 2.2%, the statistical office said.

While there were still concerns about China's economy overheating and the growth of an asset bubble, a rate rise was probably not needed, analysts said.

They added that inflation is set to slow later this year as global food prices drop and as government moves to slow the economy start to take effect.

"We think food prices in China are being driven by global food prices, which China can't do anything about," said Paul Cavey, an economist with Macquarie Securities.

Renewed pressure

However, Macquarie's Mr Cavey said that one area of concern was the fact that with inflation at its current level and banking interest rates relatively low, there was little incentive for investors to keep money in their accounts.

Instead, they probably would look to invest it in stock markets or property, increasing the chances of an asset bubble developing.

As a result, should inflation remain high, then an interest rate increase would be needed.

"If the trend of monetary expansion continues to accelerate at the current speed, it will likely post renewed inflationary pressures heading into the second half of the year," Goldman Sachs said in a note to clients.

Food prices climbed by 6% in February when compared with the same month a year earlier. One of the main drivers of growth has been world grain prices, which have pushed up bread prices in the UK and Europe.

At the same time, the price of clothing and durable goods, such as washing machines, have been rising for the first time in a decade.

Non-food inflation in February was 1%.