A US drought that pushed soya bean and corn prices to records is adding to the risk of a rebound in inflation in China, where consumer-price gains were probably close to the slowest in two years last month. Inflation was 1.9 per cent last month, according to the median forecast in a survey before a report on Monday. Credit Agricole CIB says the rate might approach 4 per cent by the end of the year and Citigroup estimates a pace of about 3.5 per cent. The prospect of faster price gains in coming months might encourage policymakers to refrain from cutting interest rates for a third time this year, contrasting with reductions in Brazil, South Korea and Australia and adding to the risk economic growth will be the weakest since 1999. Increased grain costs are feeding into pork prices and the government is also battling to prevent a rebound in the housing market. "Inflation will rise in the fourth quarter as pork and other food prices are expected to climb and housing costs are creeping up," said Dariusz Kowalczyk, senior economist and strategist for Credit Agricole CIB in Hong Kong. "This means there is no room for the central bank to cut interest rates." The benchmark one-year lending rate is now 6 per cent and the one-year deposit rate stands at 3 per cent after reductions in June and July. Officials at the nation's top four lenders have indicated that they are limiting discounts for the best corporate clients to 10 per cent on the benchmark lending rate, not the 30 per cent allowed by the central bank from July. The officials asked not to be identified as they were not authorised to speak publicly. Stocks in China have slumped about 14 per cent from this year's high on March 2 on concern the government isn't loosening monetary policy or introducing stimulus policies fast enough, as the central bank focuses instead on operations in the money market. The benchmark Shanghai Composite Index edged up 0.2 per cent yesterday to 2.104.93 points on signs of improvement in the US economy. The yuan rose beyond 6.28 per US dollar for the first time in 19 years on Thursday on speculation policymakers will act to revive growth and as the central bank raised the currency's fixing by the most in seven weeks. Trade figures to be released today might show some improvement in exports. Overseas shipments probably rose 5.5 per cent from a year earlier, according to the median estimate of 35 economists, after a 2.7 per cent gain in August. Imports increased 2.4 per cent, the survey indicated, after a 2.6 per cent drop the previous month. Industrial output, retail sales, fixed-asset investment and gross domestic product figures are due on Thursday. The worst US drought in half a century and dry weather in Europe this year are limiting world corn supplies. In China, officials have sold reserves to limit the effect on costs and monitored prices of cooking oil made from soya beans. A rebound in inflation would complicate efforts to reverse the nation's economic slowdown, as the Communist Party prepares for a once-a-decade leadership transition. The People's Bank of China said last month that it would place a bigger emphasis on price stability in setting monetary policy. China futures for soya bean-meal, the main protein ingredient used in animal feed, advanced to a record last month and wholesale pork prices climbed for the seven weeks to the week ended September 23. "The lagged impact of rising corn and soya bean prices will push consumer inflation above 3 per cent by the year-end," said Yao Wei, China economist at Societe Generale in Hong Kong. "Pork prices may take up the inflation baton in coming months." China's inflation rate in the first eight months of the year was 2.9 per cent, National Bureau of Statistics data show. The estimates of 34 economists for September consumer-price gains range from 1.5 per cent to 2.2 per cent. In contrast, September's producer price index, which measures prices at the factory gate, probably fell 3.5 per cent from a year earlier, the seventh consecutive drop, the median estimate in a survey showed. That data is also due on Monday. China's economy expanded 7.6 per cent in the second quarter from a year earlier, the least in three years, as Premier Wen Jiabao's campaign to cool prices dampened demand and Europe's debt crisis crimped exports.