China's Consumer Price Index ((CPI)) jumped 3% year over year in September, the highest reading in six years, and importantly, it breached the People's Bank of China's (PBOC) annual target of 3%.
What caused the sharp rise in CPI, and what are the implications for China's monetary policy and bond market?
After examining what's driving the rise, we are not overly concerned for a few reasons.
- September CPI does not reflect broad inflation pressure in the economy, but rather, a negative supply shock: African swine flu is spreading throughout the country, causing a 30% loss