Deflation risk warning as CPI growth eases

China's inflation moderated to a four-month low in August, with an analyst warning that the country faces higher deflation risks and calling for policies to ease to counteract any further economic slowdown. The Consumer Price Index, the main gauge of inflation, grew 2 per cent from a year earlier in August, the National Bureau of Statistics said yesterday. The rate eased from the gain of 2.3 per cent in both July and June, and turned out to be the slowest since April. The Producer Price Index, the factory-gate measurement of inflation, fell 1.2 per cent year on year last month, the bureau said. The fall widened from the decrease of 0.9 per cent in July, also indicating less inflationary pressure ahead. However, Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said China is facing increased risk of deflation. This risk reinforces the call for more policies — such as cuts in reserve requirement ratio so that banks can have more credit in hand — to ease, according to ecns.cn