Rising global food prices are beginning to be felt in China. As of yesterday, the Bloomberg Brief Daily Food Price Index is rising more than 4 percent month-on-month, its fastest rate since November 2010.
Soybeans and pork are among the bigger gainers of the past month, climbing around 7 percent. Food carries a weighting of about 30 percent in China’s headline CPI, compared with just 15 percent in the U.S. Accelerating food prices due to drought and less favorable year-ago comparables may imply that Chinese inflation bottomed in July and will move higher in the remainder of the year. This may close the door on further rate cuts, while leaving room for additional RRR reductions before year-end.