The Bank of China has forecasted a 7.5 percent or even higher rise in the January Consumer Price Index (CPI), mainly fuelled by rocketing food prices and the worst snow disaster in decades.

The bank said in report issued Friday that the CPI would rise between 5 to 7 percent in the first half this year, and decelerate to 3-4 percent in the latter half. The yearly CPI increase for 2008 would stay at the same 4.8 percent as that of last year.

The yearly GDP growth would be 10 percent, less than the 11.4 percent for 2007, the bank predicted.

The grain price rise last December helped stir up another round of food price jump, which is the main force driving up the inflation index, the report said.

Grain prices in major wholesale markets rose by a year-on-year 10 percent in 2007, and the prices of soybean, corn and wheat jumped between 7.2 to 25 percent last year.

The report noted the massive losses from the snow havoc could help fuel inflation in the short-term. The disaster, however, could take a limited toll on the national economy in the long run.

The CPI rose 4.8 percent in 2007 and hit an 11-year high of 6.9 percent in November, well above the government target of 3 percent.

The report suggested the central bank should tighten monetary policies to curb inflation and continue to stimulate domestic demand. One or two interest rate hikes are advisable.

Another deposit reserve ratio rise is projected by the bank this month.

(Xinhua News Ageny February 17, 2008)