Inflation hits two-year high

Inflation in China increased to 3.4% in May, nearly twice as high as November levels and above the country's "comfort zone" of 3%, the Financial Times reported. Inflation rose because of a jump in food prices – pork in particular – over the preceding months, marking a 27-month high. The People's Bank of China is expected to introduce tightening measures, like interest rate increases, in response. The central bank is not expected to introduce the measures immediately because it has already hiked interest rates, the reserve requirement ratio and widened the exchange rate trading band on May 18. Food prices, which make up a third of the consumer price index basket, increased by 8.3% in May, mainly due to rises of up to 49% in the price of pork. The current inflation rate is higher than the one-year deposit rate of 3.06%, which means savers have negative real interest rates.