China CPI edges higher in December, more stimulus still seen

Chinese consumer prices edged past forecasts in December, but factory gate inflation continued falling for a 46th consecutive month, paving the way for further monetary stimulus as soon as this quarter, economists said.

The country's consumer price index advanced at a 1.6% year-on-year pace last month, according to China's National Bureau of Statistics.

That was exactly in-line with economists' median projection and was higher than November's print of 1.5% and October's reading of 1.3% - but still stood at about half of policymakers' target.

Producer prices on the other hand narrowly missed estimates, dropping at a 5.9% year-on-year clip for a fifth consecutive month (consensus: -5.8%).

Officials in Beijing have been trying to wean Asia's second largest economy off its reliance on government spending, shift the axis of growth towards internal consumption and attempting to offset the currency's strengthening over recent years.

CPI got a boost mainly from food price inflation, which increased by 2.7% in over the year terms. Non-food prices rose 1.1%.

In the very short-term, some economists suggested the People's Bank of China might opt for a further reduction in banks' reserve requirements from 17.5%, in a bid to prop up economy activity,as opposed to cuts in base interest rates, which might have unwanted effects on the currency, the yuan.