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China consumer price index at 3%, lowest in 2 years

The latest CPI data, a key gauge of inflation, gives Beijing more room to ease monetary policy after cutting interest rates on Thursday.

China vegetable marketEnlarge
Shoppers purchase vegetables at a market in Shanghai on May 23, 2012. (AFP/Getty Images)

China’s consumer prices rose in May at the slowest pace in two years, giving Beijing more room to ease monetary policy after cutting interest rates for the first time since the global financial crisis.

The country’s consumer price index, a key gauge of inflation, rose three percent from a year earlier, compared with 3.4 percent in April, Bloomberg reported today, citing the National Bureau of Statistics.

"Inflation is easing as expected, or easing even faster than expected, which is mainly due to economic weakening not only in China but also around the world," UBS economist Wang Tao was quoted by the Wall Street Journal as saying.

Other data released today showed industrial output, a key measure of output from the country’s thousands of workshops and factories, grew at a slower-than-expected 9.6 percent year-on-year in May, Agence France-Presse reported.

The figures came after the People's Bank of China on Thursday cut interest rates for the first time in more than three years and moved to allow rates to float more freely as the world’s second-largest economy loses steam.

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The Associated Press quoted IHS Global Insight analyst Alistair Thornton as saying the latest data paved the way for further stimulus measures to spur economic activity.

"Receding consumer price inflation frees up much-needed space for policymakers to loosen credit and roll out investment plans," Thornton said in a report.

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http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/120609/china-consumer-price-index-at-3-lowest-2-years