China: CPI inflation forecasted at 2.0% in 2019 – Standard Chartered

Analysts at Standard Chartered are revising their 2019 CPI inflation forecast of Chinese economy lower to 2.0% from 2.7%, versus 2.1% in 2018.

Key Quotes

“We expect moderating demand and slower oil price growth to drag headline CPI inflation lower despite higher food inflation on a positive base effect.”

“We expect core CPI inflation (excluding food, energy) to trail the slowing economy, averaging 1.7% in 2019 versus 1.9% in 2018 and 2.2% in 2017. We expect 10% growth in Brent oil prices to translate into a 3% rise in retail fuel prices.”

“While tepid inflation is not an imminent concern, it should improve policy flexibility amid a slowing economy. Fiscal stimulus is expected to be ramped up in 2019 while monetary policy should stay accommodative (to ensure liquidity for increased bond issuance).”