China's inflation growth forecast to drop

An upcoming release of official economic data is likely to show that the consumer price index (CPI), the main gauge of inflation, might moderate to a growth between 2.3 and 2.4 percent in June, down from 2.5 percent in May, economists have predicted.

A median forecast by the Bank of Communications (BOCOM) on Monday said the CPI probably grew 2.4 percent in June.

BOCOM analyst Tang Jianwei said food prices, which account for around one third of the weighting in CPI calculation, were generally stable last month, and prices of vegetables, meat and sea products began dipping in the latter half month of June.

The forecast is the same as one made by the Agricultural Bank of China (ABC). ABC economist Fan Junlin also said inflation probably grew by 2.3 percent in the first half of 2014.

Government data on June inflation as well as the producer price index is due on Wednesday.

Economists predict that inflation will continue with a tempered growth rate in the next half of the year. Whole-year inflation is expected to fall short of 2.5 percent.

Given that inflation remains well under control, analysts said this will leave room for the government to further ease monetary policies in the coming months.

"I think macroeconomic policies will further relax in the second half of the year. Fiscal policies will be made more active with an eye to boosting growth as well as restructuring," said Zhou Jingtong, a senior analyst at Bank of China.

Zhou also predicted central bank policies will become more flexible and targeted, and it might also expand cuts in reserve requirement ratios for certain banks.