2010-11-04 09:55

BEIJING - The Consumer Price Index (CPI), the main gauge of inflation in China, is likely to rise 4.1 percent in October after accelerating to a 23-month high of 3.6 percent in September, the Bank of Communications forecast on Wednesday.

The bank, China's fifth largest lender, said in a report that the index would see moderate dips in the coming two months amid decreasing demand due to the slowing economy.

But oversupply of liquidity at home, surging food prices, rising labor costs, and pressures caused by imported inflation would mean very limited room for the index to drop, the report said.

The report predicts China's CPI would rise 3.1 percent for the entire year of 2010, topping the government's target to keep the inflation rate under 3 percent.

It also forecast food prices would rise further during the first half of 2011.

Food prices, which account for one-third of weighting in calculating the CPI in China, climbed 8 percent in September, pushing the CPI to the highest level in nearly two years. Food prices had risen 7.5 percent in August, 6.8 percent in July, and 5.7 percent in June.