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Chinese inflation fuels currency debate

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Chinese inflation fuels currency debate

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As the currency squabbles continued at the G20 summit, inflation in China reached its highest in just over two years.

Prices for consumers were up in October by 4.4 percent compared to the same month last year.

Wholesale prices also jumped, climbing at an annual rate of five percent.

At the same time, the US Treasury Secretary Timothy Geithner said Beijing cannot continue to keep its yuan currency low in value without facing higher inflation. He added that he believes there had been progress on China currency issues at the G20.

The inflation numbers leave little doubt as to why China’s central bank just raised the amount that banks have to keep in reserve.

Economists predict further anti-inflation moves, such as raising interest rates and letting the yuan appreciate.

The yuan has risen in value this week leading some dealers to speculate Beijing is trying to deflect the US complaints that its holds the currency down in order to help exporters.