Shanghai Daily news

China's inflation cooled slightly last month from a decade high after the central bank raised borrowing costs and bank reserve requirements, a senior government official said yesterday during the ongoing 17th National Congress of the Communist Party of China.

Analysts said price levels, although showing signs of stabilizing, still remained high, raising the likelihood of further economic tightening action by the central bank in the fourth quarter.

China's Consumer Price Index, the main gauge of inflation, climbed 6.2 percent last month from a year earlier, just below the decade-high 6.5 percent increase reported in August, Zhu Zhixin, deputy director of the National Development and Reform Commission, told reporters in Beijing.

Combined growth over the first nine months mounted to 4.1 percent over the year before, Zhu said, compared with a three percent target for all of 2007.

Deutsche Bank AG said it expects inflation growth to average between six and 6.5 percent year on year in the September to November period.

Yet several recent indications suggest that inflation is likely to moderate in the coming months, economists said.

The wholesale agriculture price index declined one percent month on month in September, according to the Ministry of Agriculture. A good autumn grain harvest will help hold the line on grain prices in the last quarter, cutting risks of a price spike spilling over into nonfood categories.

Officials at the nation's top planning body said recently that consumer prices are still "under control" and the government is taking measures to stabilize the price of pork, which soared over the summer partly because of disease-induced shortages.

Zhu noted, however, that the pork situation didn't trigger "comprehensive, lasting and big price hikes."

He predicted that grain prices will stabilize gradually, as the summer grain crops harvest has surged 1.45 billion kilograms from the previous year to 115.35 billion kilograms this year while early rice output rose slightly to 31.95 billion kilograms.