Chinese inflation falls sharply, time to ease?

China’s October consumer price index fell to 5.5% year-on-year, the lowest during the past five months, leaving room for the government to push on with selective easing policies in the coming months.

The lower CPI number, which compared with 6.5%, 6.2% and 6.1% for July, August and September respectively, shows Beijing’s battle against soaring consumer prices has taken effect. However, inflation remains a top concern for policymakers and a monetary policy U-turn is unlikely before headline CPI drops to below 4%, which is Beijing’s inflation target for 2011, according to HSBC.

“There will be neither further tightening nor an immediate relaxation of the tightening this year,”...