Falling prices spur expectations of China rate cut

China’s national ego is swelling once again as patriotic citizens proudly count the gold medals won at the London Olympics. But the national economic data released last week tells a different story.

China’s consumer price index CPI for July fell to a two-and-a-half year low of 1.8%, down from 2.2% in June. The figure is falling further from a 4% inflation target the Chinese government has set for 2012, which gave a strong signal that Beijing will come up with more aggressive stimulus measures to revive the world’s second-biggest economy.

“The 30-month low inflation reading reinforces the case for more decisive easing actions soon,” said Qu Hongbin,...