China inflation rate highest in three years

China reported its highest inflation rate in three years, a welcome sign for a country grappling with deflation and moribund consumption.

The increases were driven by surging spending during the Lunar New Year holiday. But economists noted the war in the Middle East and Chinese authorities’ campaign against “involution” — price wars that damage market competition — were likely to further fuel inflationary pressures, helping ward off a “deflation doom loop.”

Chinese policymakers also set a 2% inflation target for the year, which would have looked ambitious until recently. But “as things stand, they won’t need to do much to achieve this,” ING’s China chief economist wrote in a note, while Goldman Sachs raised its inflation forecast for the year.