Taking Cues From The Mainland

We expect Hong Kong's consumer price inflation (CPI) to remain stubbornly high in the short run due to elevated inflation in the mainland, and we are bumping up our 2011 Hong Kong average CPI forecast from 4.0% to 4.3%. Nonetheless, we expect disinflation to take hold in the latter part of the year, as tightening monetary conditions in the China leads to an economic slowdown that extends into the mainland-dependent Hong Kong economy.

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