A poll of 21 economists gave a median forecast for a 2.3 per cent rise in China's consumer price index last month from a year earlier, versus May's increase of 3.0 per cent.
The poll forecast a fall of 1.9 per cent in producer prices in June from a year earlier, the lowest in 31 months, compared with a drop of 1.4 per cent in May.
"As the economic downtrend has not yet stabilised, and inflationary pressure continues to ease, there is a rising urgency for more policy easing," said Jianguang Shen, at Mizuho Securities in Hong Kong.
He expects more cuts in both benchmark interest rates and bank reserve requirement ratio (RRR) before the end of 2012.
The People's Bank of China cut interest rates in a surprise move on June 7, its first since the depth of the global financial crisis. The central bank has also lowered in three steps since November the amount of cash banks must park with it rather than lending them out.
Some economists expect an RRR cut could happen imminently, which could free around 400 billion yuan ($63 billion) for lending to support the slowing economy.
"Declining CPI and PPI, once considered a silver lining, are now posing disinflation risk that threatens aggregate demand," said Banny Lam, at CCB International Securities in Hong Kong.
The deteriorating global economy has driven down prices of oil and commodities, of which China is a big importer. Meanwhile, domestic prices of food, including the staple meat of pork, vegetables and fruits, also fell sharply in June.
A pair of purchasing managers' index released this week - earliest indicators to gauge the health of the Chinese economy - showed China's factory activity slowed to a seven-month low in June, due to slackening external and domestic demand.
Source: http://economictimes.feedsportal.com/fy/8av2Fvy0bVRI02h0/story01.htm
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