Inflation has risen faster than anticipated over the last few months and is now the primary concern of both policymakers and markets. A tight credit quota seems likely for 2011 – perhaps RMB6.5trn compared with the RMB7.5trn this year – as the government strives to ensure that inflation does not spread beyond food. Of less importance to the economy, benchmark interest rates will be hiked further too. But it is important not to overreact. Headline inflation is still a long way below the level reached in early 2008. That experience underlines that spikes in food prices can take several months to run their course. But as long as core inflation remains low, the headline rate is far more likely to drop back than spiral out of control.