China’s slowing inflation leaves ‘plenty of room’ for central bank to cut rates, analyst says

China’s inflation rose less than expected for the month of December, official data showed on Thursday.

The country’s December producer inflation rose 0.9 percent on-year, lower than the 1.6 percent economists were expecting in a Reuters poll.

China’s December consumer inflation (CPI) — a gauge of prices for goods and services — rose 1.9 percent on year, lower than economists’ expectations of a 2.1 percent growth, according to a Reuters’ poll.

Economic data from the world’s second-largest economy are being closely watched for signs of damage inflicted by the trade war between Washington and Beijing.

While official data indicated China’s economy held up for much of last year, it now appears to be slowing as production metrics and export orders fall amid the country’s trade dispute with the U.S., its largest trading partner.

Beyond the tariffs battle, China’s economy has been facing its own domestic headwinds. Even before U.S. President Donald Trump kicked off the latest escalation in trade tensions, Beijing was already trying to manage a slowdown in its economy after decades of breakneck growth.

Chinese and the U.S. officials concluded another round of trade talks Wednesday, which were extended into a third day.

In a Thursday morning statement, China’s Commerce Ministry said the trade talks were extensive and established a foundation for the resolution of each others’ concerns.