China expects inflation to rise in May, June

[May 18, 2010]  BEIJING (AP) -- China's inflation should rise slightly in May and June but the overall increase in consumer prices for the first half should be just 2.5 percent over a year earlier, a Cabinet agency said Tuesday.

The forecast by the National Development and Reform Commission appeared to be an effort to reassure the public following double-digit increases in vegetable prices in recent months.

Inflation in May and June should rise to 3 percent, up from April's 2.8 percent rate, the NDRC said on its Web site.

The government has set a 3 percent inflation target for this year, and companies and investors worry that the recent rise could prompt interest rate hikes or other steps that might slow China's economic rebound.

Analysts have said they expect China's inflation to continue to rise through the middle of the year but the government has said it expects an easing in the second half of the year due to better harvests.

"Vegetable prices will start to fall back" in the current quarter as supplies increase following shortages due to an unusually cold, dry winter, Tuesday's NDRC statement said.

[Associated Press]

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