July inflation will be 6.4pc, economists say
Mainland consumer price index figures are expected to show that inflation remained high last month, pushed up by rising food prices, economists said ahead of the official release of data. The CPI is likely to stay at around June's three-year-high of 6.4 per cent last month, the economists said.
Food prices account for about one third of the overall CPI indicator.
The National Bureau of Statistics is due to announce inflation and other key economic data later today.
Stubbornly high inflation has driven many economists to forecast another interest rate rise of 25 basis points this year.
Since China started tightening measures to rein in liquidity last October, interest rates have been raised five times.
Mizuho Securities revised up its July CPI forecast from a 6.3 per cent year-on-year rise to 6.4 per cent last week. It was one of several brokerages which raised their predictions last week after Ministry of Commerce data showed pork prices climbed 11 per cent in the month.
UBS Securities is forecasting July CPI to remain at 6.4 per cent, estimating that food inflation has stayed above 14 per cent year on year and non-food inflation stayed at about 3 per cent.
'We expect pork prices to moderate in coming months and [the] base effect to be more favourable. Both would help the CPI to come down gradually,' said Wang Tao, an economist at UBS.
For the full year, CPI may rise 5 per cent year on year, Chen Jiagui, a researcher with the Chinese Academy of Social Sciences wrote in the People's Daily last Friday. China's official annual target for CPI is 4 per cent.
Yang Ming, an analyst with Shenyin and Wanguo Securities is less optimistic, forecasting a new high of 6.7 per cent. His brokerage expects further tightening measures.
The People's Bank of China, the country's central bank, said last week that monetary policy would not be relaxed because 'the domestic inflation expectation is still high' and 'the foundation of stabilising prices is not solid'.
'Once policies are loosened, inflation could possibly rebound,' it said, adding it would continue to give price stabilisation the top priority.
However, Chen said China should take a wait-and-see attitude to the unfolding international outlook, and monitor the European debt crisis, and US and Japan efforts towards economic recovery.