Inflation Concerns To Subside By Mid-2011

With high food prices likely to keep upward pressure on consumer price inflation in the months ahead, we are upping China's 2011 average CPI forecast from 2.6% to 3.2%. That said, we are sticking with our end-2011 2.6% target as we expect an impending growth slowdown to be disinflationary in nature. Risks seem asymmetrically weighted to the upside, particularly if Beijing were to orchestrate another round of fiscal stimulus.

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