Inflation target difficult

China's consumer price index (CPI), the main gauge of inflation, saw a moderate rise of 2.4 percent year on year in March, and a decline of 0.7 percent month on month.

The inflation rate was still below the government's upper limit of 3 percent inflation this year, but staying within the limit might be "difficult and challenging," said Li.

For the first quarter, the figure was up 2.2 percent from the same period last year.

China had set a ceiling of 3 percent for rises in consumer prices in 2010, according to a government work report delivered by Premier Wen Jiabao last month at the annual parliamentary session.

"China's consumer prices are basically stable," Li said, adding that the goal was still within reach with "concerted efforts and solid work."

Li attributed the rise in CPI to the relatively low comparison basis of the first quarter of 2009 and the freezing winter, which brought dramatic rises in food prices.

Li also noted that other factors -- rising international commodity prices, domestic producer prices and industrial costs -- had also started to push up the CPI.

Zhu Baoliang, chief economist at the State Information Center, said the government might find it difficult to achieve the 3-percent limit, but it could easily hold the inflation rate within 4 percent this year.

Consumer prices were growing at a moderate level, but there was still possibility of further inflation, due to excessive money supply, as well as the skyrocketing property prices and the prolonged drought in south China, Zhu said.

But as the government was set to gradually scale back money supply, inflation pressure would eventually ease, he said.

Jing Ulrich, chairman of China Equities and Commodities of JP Morgan Chase, agreed that inflation was expected to rise before peaking around mid-year.

Considering the upward trend in consumer prices and the recovery in exports, China's central bank might begin to raise interest rates in the second quarter to keep inflation in check, she said, adding J.P. Morgan Chase expected the PBOC to raise interest rates three times in 2010.

However, she said Tuesday's price hike in fuel products had indicated policy makers' confidence in inflation control and "a measure of comfort with China's near-term inflation outlook."

She forecast that CPI growth would stand at 3.2 percent for 2010.

(Xinhua News Agency April 15, 2010)