Updated: 2005-06-14
China's central bank cut its 2005 inflation forecast, one day after data showed consumer price rises hovering at 19-month lows, suggesting an interest rate hike is not an immediate prospect.

The People's Bank of China expects consumer inflation to run at between three and 3.5 percent this year, it said in its annual report published on its website.

This is down from previous central bank forecasts of a four percent rise in consumer prices this year and compares with last year when consumer price inflation reached an eight-year high of 3.9 percent.

Recent statistics published by the Chinese government suggest a moderation of inflationary pressures, brought about by overcapacity resulting from years of frantic investment in new plant and equipment.

The consumer price index rose 1.8 percent in May, extending into a second month a drop in the inflation rate to a level not seen since October 2003, the National Bureau of Statistics said Monday.

Zhou Xiaochuan, the central bank governor, said last week that there would be no interest rate hikes in the short term.

In its annual report, the bank said rising oil, raw material prices and labor costs would put upward pressure on consumer prices but food prices, the largest contributor to price growth last year, would ease.