China predicts low inflation based on western monetary moves – Bloomberg

“Inflation in China will remain modest in 2022 if shifting monetary policies elsewhere weaken the rally in global commodities,” Bloomberg quotes weekend comments from China’s top economic planner National Development and Reform Commission (NDRC).

The news also quotes NDRC's statement expecting the CPI to rise in 2022, following a pullback from a 15-month high in December. That said, the year 2021 average increase in CPI was 0.9%, per Bloomberg.

Key quotes from Bloomberg

The producer price index, up 8.1% last year, is also likely to cool down, the agency said, citing ample domestic supply of industrial and energy products to counter ‘irregular price fluctuation.’

China expects monetary tightness in western countries to weaken price inflation on imports.

Bloomberg economic estimates the Group of Seven central banks will cut total 2022 asset purchases to just 10% of the 2021 level. 

FX implications

As China returns from a week-long Lunar New Year holidays, news like this should entertain USD/CNY and AUD/USD traders.

Read: AUD/USD buyers await China’s return below 0.7100