(Xinhua)
Updated: 2008-06-03 17:02

BEIJING  -- Inflation might have shown a marked deceleration in May as food prices dropped, offsetting hikes in non-food prices, according to the China International Capital Corp. (CICC).

The consumer price index (CPI), the main gauge of inflation, probably rose 7.7 percent to 8.1 percent year-on-year last month, investment bank CICC said.

The CPI jumped 8.5 percent in April, up from 8.3 percent in March and near the 12-year-high of 8.7 percent in February.

The CICC said in a report that consumer prices would continue their downtrend in the coming months with declining food prices.

Prices of food, a major driver behind China's high inflation, would likely continue falling because of increasing supplies and an expected bumper harvest.

The authorities were unlikely to unveil new tightening measures or raise fuel prices in the short term following the devastating earthquake on May 12 and in the face of high inflation, CICC said. The decelerating inflation might offer an opportunity to raise fuel prices in the second half of the year.

The report suggested the government raise fuel prices, which are more than 50 percent below international levels, and scrap subsidies to oil refiners to encourage energy conservation and reduce pollution.

China has refrained from raising fuel prices despite record world crude prices, on fear that any hikes could further fan inflation.