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China's inflation at decade high

  • Story Highlights
  • China's inflation accelerated in February to 8. 7 percent -- its highest rate in a decade
  • Snowstorms worsened food shortages and disrupted the economy
  • The announcement increase the likelihood of interest rate hikes
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BEIJING (AP) -- China's inflation rate jumped to a new decade high of 8.7 percent in February after severe winter storms disrupted the economy and worsened food shortages, the government said Tuesday.

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Devastating snowstorms in China have worsened food shortages, setting back efforts to cool rising prices.

The increase was driven by a 23 percent jump in food prices, according to the National Statistics Bureau. It was a sharp jump from January's 7.1 percent rate and exceeded forecasts by outside economists.

The announcement increased the likelihood of interest rate hikes or other government steps to cool a surge in inflation that began in mid-2007. Beijing has raised interest rates repeatedly and tried to increase food supplies to cool price rises.

Analysts were forecasting a February inflation rate close to 8 percent.

Snowstorms that began Jan. 10 and lasted in February hammered China's south, wrecking crops, paralyzing shipping and forcing some steel mills and factories to shut down. Shortages of meat and fresh vegetables caused prices to soar in snow-hit areas.

Chinese leaders worry about the political impact in a society where families spend up to half their incomes on food. They have frozen prices of gasoline, electricity and other basic goods and ordered food processors to get approval for any price hikes.

Inflation has been limited mostly to food, but data reported earlier show that pressure for across-the-board price rises is growing amid a boom that saw China's economy expand by 11.4 percent last year.

The cost of basic oil products jumped 37.5 percent jump in February while that for steel products was up 29.6 percent, the statistics bureau said Monday. Food-related raw materials rose 11 percent. E-mail to a friend E-mail to a friend

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