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BEIJING - CHINA'S inflation likely hit a new 11-year high of 8.3 per cent last month on the back of soaring food prices, state media said on Sunday, citing research from Bank of China.
Xinhua news agency reported the estimate ahead of Tuesday's keenly awaited publication of official inflation data from the National Bureau of Statistics, which are used by authorities to decide whether to tighten monetary policy.
January's inflation of 7.1 per cent was already the highest since September 1996.
The bank, China's second largest lender, said in its report that February's spike in the consumer price index was fuelled mainly by food, which rose more than 22 per cent from a year earlier, according to Xinhua.
'Making things worse... when people expect prices to keep rising, they will spend more to avoid those future rises, which in turn will push prices up,' Xinhua said, quoting the bank.
China's inflation is seen as triggered mainly by the relative scarcity of basic commodities, leaving economic policy-makers with a dilemma when opting for the right response, according to observers.
If they hike interest rates - the classic response to rising inflation - they risk deterring producers of these basic commodities, mainly food such as pork, thus making the problem worse.
China's economy, the fourth largest in the world, expanded by 11.4 per cent in 2007, its fifth consecutive year of double-digit growth. -- AFP
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