China Inflation?

I read an article published on Bloomberg.com today you can also read here:
http://www.bloomberg.com/apps/news?pid=
20601039&sid=aWHH.9qAjPf8&refer=home

This is my response to this article and the many other's like it after China published their latest inflation numbers.

Hello Mr. Pesek,

I am a little confused about your assertion that China needs desperate action to tame it's inflation. The confusion arises when I see China's inflation quoted including very volatile recent changes in food prices with no reference to energy.

The Fed and economist in the US have made the gross error over the past 5 years with respect to calculating our inflation by taking out food and energy when giving what they consider "core" inflation. Removing a "volatile" component from the index is OK when it is "volatile" but when it is consistently moving higher, tripling in fact, over the period as energy prices have, is disingenuous and dangerous to economic policy initiatives.

Now back to China. It is clear that lesser nations have paid heavy prices for pegging their currency while ignoring domestic price and market pressures and China may one day pay for their misguided policy, but for now I smell a rat. There seems to be an assertion that China's inflation should be quoted in total without stripping out volatile price components that are truly volatile in order to justify the need for dramatic increases in their interest rates and of course, added pressure to do the one thing Washington and Wall Street (with billions of dollars riding on the prospect) wants to see China do: Dramatically revalue their currency or let it float altogether.

So in the future, perhaps you may want to give the headline inflation number coming from China the same kind of scrutiny the headline number gets in the US regardless of the political will to do otherwise.

Sincerely,